COPY"

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NAVAL POSTGRADUATE SCHOOL

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?-"TE

TEu

THESIS"W
EVALUATION OF THE SHIPYARD MANAGEMENT

INFORMATION SYSTEM (MATERIAL

MANAGEMENT FUNCTIONS) AT THE
LONG BEACH NAVAL SHIPYARD
by
John A. Rackliffe
September 1989
Thesis Advisor:
Co-Advisor:

Joseph G. San Miguel

Dan Trietsch

Approved for public release; distribution is unlimited.

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EVAUIATION OF THE SHIPYARD MANAG

T INFO1RRTION SYSTEM
(MATEIAL MNAGEENTf FUNCTIONS) AT THE LONG BEA-I NAVAL SHIPYARD
12

PERSONAL AUTHOR(S)

RACKLIFFE, JOHN A,
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TYPE OF REPORT

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18 SUBJECT TERMS (Continue on reverse if necessary and identify by block number)

COS-' 1 CODES

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F ED

MATERIAL MANAGEMENT

SUB-GROuP

GRO.,P

MANAGEMENT INFORMATION SYSTEMS

19

ABSTRACT (ontinue

on reverse if necessary and identify by block number)

efforts to improve material management through the reduction of

inventories and the modification of inventory management policies, naval shipyards
continue to experience the saro problems.
This thesis examines yet another aspect of the problem, the shipyard
management information system's material management function.
An evaluation of
this function against a theoretical I ideal is made and recnenations for
improvement provided.
Results indicate that the information system has surpassed
its useful life time and should be upgraded. Nevertheless, an information system
alone is not going to solve the material management problems.
Rather, top
management must develop a strategic business plan based on modern production
management principles such as just-in-time and material requirements planning that
encompasses the entire repair process from planning to production. Once developed,
this plan could then be used to develop an information system based upon the
/
. !
required controls set forth in the plan.
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N;D",'D,

JOSEPH G. SAN MIGUEL

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Approved for public release; distribution is unlimited.

EVALUATION OF THE SHIPYARD MANAGEMENT INFORMATION SYSTEM

(MATERIAL MANAGEMENT FUNCTIONS) AT THE
LONG BEACH NAVAL SHIPYARD
by

John A. Rackliffe
Lieutenant, Supply Corps, United States Navy
B.A., Miami University, 1980
Submitted in partial fulfillment
of the requirements for the degree of
MASTER OF SCIENCE IN MANAGEMENT
from the
NAVAL POSTGRADUATE SCHOOL
September 1989

Author:

__________/__

Jhn
Approved by:.*_

A.
_

Rackliffe//
_

J seph/G.

__

San-Kiguel,

__

?!iesis/Co-Advisor

Dan Trietsch, Thesis Co-Advisor

David R. Wipjle,

hairman

Adminstratve Siin

ABSTRACT

Despite efforts to improve material management through

the

reduction

of

inventories

and

the

modification

of

inventory management policies, naval shipyards continue to

experience the same problems.
This thesis examines yet another aspect of the problem,
the

shipyard

management

management function.
a

theoretical

information

system's

material

An evaluation of this function against

"ideal"

is

made

and

recommendations

for

improvement provided.

Results indicate that the information

system has

its

upgraded.

surpassed

useful

life time

and should

be

Nevertheless, an information system alone is not

going to solve the material management problems.

Rather,

top management must develop a strategic business plan based

on modern production management principles such as just-intime and material requirements planning -Ll
entire

repair process

developed,
information

this

plan

system

encompasses the

from planning to production.

could

based

then

upon

forth in the plan.

iii

the

be

used

to

required

Once

develop

controls

an
set

TABLE OF CONTENTS

I.

II.

III.

IV.

INTRODUCTION .......................................

A.

PREFACE ........................................

B.

PURPOSE ........................................

C.

SCOPE

..........................................

D.

RESEARCH TECHNIQUE .............................

E.

THE THESIS ORGANIZATION

........................

...........................

A.

BACKGROUND .....................................

B.

ORGANIZATIONAL DECISIONS AND THE SYSTEMS

APPROACH .......................................

A FRAMEWORK FOR ANALYSIS

C.

MATERIAL MANAGEMENT FUNDAMENTALS ................ 12

D.

ORGANIZATIONAL INFORMATION SYSTEMS

............

34

SCOPE OF THE MATERIAL MANAGEMENT PROBLEM

[PREVIOUS STUDIES] ................................

40

A.

"MUCH ADO ABOUT MAINTENANCE"

..................

40

B.

SHIPYARD MATERIAL AND WORKLOAD PLANNING ........

41

C.

MATERIAL MANAGEMENT INFORMATION SYSTEMS ........

44

D.

PROCUREMENT

...................................

45

E.

INVENTORY MANAGEMENT ..........................

46

F.

SUPPLY SYSTEM CONSTRAINTS .....................

47

SYMIS AND THE LONG BEACH NSY ENVIRONMENT ............50

A.

LONG BEACH NSY MISSION AND ORGANIZATION ........

B.

SHIPYARD MATERIAL MANAGEMENT POLICY SUMMARY ... 53

iv

50

C.

OVERVIEW AND ANALYSIS OF THE SYMIS MATERIAL

MANAGEMENT FUNCTION ...........................

59

HARDWARE AND SOFTWARE CHANGES

.................

73

ASSESSING SYMIS EFFECTIVENESS .....................

75

A.

INFORAATION NEEDS

.............................

76

B.

ANALYSIS

......................................

77

C.

INFORMATION SYSTEMS FOR THE FUTURE ..............82

D.
V.

VI.

SUMMARY AND RECOMMENDATIONS .......................

87

A.

SUMMARY .......................................

87

B.

RECOMMENDATIONS

...............................

92

C.

SUGGESTIONS FOR FURTHER RESEARCH ..............

95

LIST OF REFERENCES

......................................

INITIAL DISTRIBUTION LIST

-e

, .I

;.v:

...............................

cn 9/or

___I_____
st:t
pecal

V-

96
98

INTRODUCTION

I.
A.

PREFACE
The

Reagan,

1980's,
will

under the

long

be

leadership of

remembered

as

President Ronald

a decade

of

renewed

patriotism, increased military interest, and federal deficit

spending.

From 1980-1987, defense spending grew faster than

inflation, while modifications to the tax structure reduced

excess

revenues

increases.

previously

Budget

available

deficits

grew

to

year

offset
after

spending

year

until

Congress moved to force a balanced budget by 1992, enacting

the

Gramm-Rudman-Hollings

1985.

Under

GRH

the

(GRH) Deficit

president

could

frivolous with the defense dollar.

Reduction
no

longer

Act

in

be

as

Congressional watchdogs

began to scrutinize the Defense Department ensuring that the

tax-payer was getting the most "protection" for his or her
money.
Over

the past

several years

a number of studies have

been performed by the General Accounting Office (GAO),

Office

of

the

congressional

Secretary

of

Defense

appointees delving

Department's activities.

(OSD),

and

the

various

into many of the Defense

These investigations have revealed

such "horror stories" as overpriced ash trays, toilet seats

and hammers, to the most recent conflict of interest charges

filed

against

top-level

Department

of

Defense

(DOD)

In light of

personnel for their dealings with contractors.

these reports, tighter congressional and executive controls

have been imposed on military managers entrusted with public
funds and materials.
The Naval Sea Systems Command (NAVSEA)

operates within

a budget of approximately $4.5 billion annually.

funds

NAVSEA

executes

repairing Navy ships

its

duties

of

and submarines.

With these

overhauling

Its

and

Industrial

and

Facilities Management Directorate has management control of

eight

naval shipyards

Conversion,
offices

and

plan

Repair

and

approximately

and 16 Supervisors of Shipbuilding,

manage

40

(SUPSHIP) offices.
the

private

overhaul
shipyards

of

The
Navy

located

SUPSHIP
ships

in

in

their

geographical areas.

The Navy Industrial Fund (NIF) provides

working

support

capital

adequate

to

materials

alteration work.
large

budget

to

naval

shipyard

complete

operations

required

repair

and
and

In order to accurately account for such a

and

avoid

the

GRH

"deficit-reduction

ax,"

NAVSEA and shipyard managers must exercise control over and

monitor the "pulse" of the entire organization.
Given

the

task

at

hand,

an

information system (MIS) must be used.

automated

management

The system should be

designed using sound MIS principles and have software that

is written with consideration for management policies, user

needs, and timeliness of reporting.

Today the eight naval

shipyards utilize the Shipyard Management Information System

(SYMIS) to fulfill the majority of its MIS requirements.
PURPOSE

B.

The purpose of this research is to outliie a framework

of "ideal" automated material management information system
principles, utilizing accepted material management and MIS
theory and use it to evaluate the Material Management (MM)
application of SYMIS in use at the Long Beach Naval Shipyard
(LBNSY).
Creating an "ideal" standard from theoretical literature
is

complex

undertaking.

After a substantial

review and a review of previous

literary

studies highlighting

the

naval shipyard management function, this paper will create

L

_,I ,:,iworiu& 1k fio~a

Using

this

framework

analysis of

analysis

the

rno.

as

commonly

the MM application

is

augmented

template

accepted

for

principles.

comparison,

at LBNSY will be made.

with

rezponses

from

an
The

management

personnel to direct questions and the author's perceptions

from on-site visits.
Specific questions addressed in this research are:
1.

What information does the shipyard logistician require

to make sound material management decisions?

2.

What

factors should be

considered when evaluating a

MIS?

3.

What policies are in place at LBNSY for the management

of materials for ship overhauls?

4.

What are the capabilities

software?

C.

limitations of the MM

and

SCOPE
shipyards are currently using the same

All eight naval

Therefore, in order

automated MM application on the SYMIS.

to

maintain

only

on

at

operations

provide

a meaningful

will

limited to

will

exclude

activities

Long

Naval

Works

Public

the

to

scope

ship overhauls and

non-nuclear surface

as

study needed

Additionally,

for

requirements

focus
This

Shipyard.

of

depth

assessment.

material

such

research will

this

Beach

sufficient

for

limitation allows

be

scope,

reasonable

other

shipyard

maintenance,

capital

projects, and overhaul of Depot Level Repairables.

Since this research was not sponsored, travel funds were
prcvided

solely

Administrative
shipyard

from

Sciences

visits

and

limited

pool

Curricular
detailed

limited to only two days.

controlled

Office.

personal

As

by

the

result,

interviews

were

Given these limitations and the

complexity of the shipyard organization this study provides

only an introduction to a very complicated subject.
D.

RESEARCH TECHNIQUE
Material management studies by GAO and other agencies as

well

as

sources

logistics management
of

data

for

the

and MIS texts

study.

were the major

NAVSEA

and

LBNSY

instructions
background

and

computer

material

to

user

manuals

formulate

were

interview

used

as

questions.

Theoretical research and personal interviews at the shipyard

enabled a comparison to be made between an ideal system and
the

SYMIS

MM

application.

Subsequent to this comparative

analysis,

an

evaluation

the

recommendations

for

of

system's

improvements

effectiveness

and

suggestions

for

and

alternatives are made.

E.

THE THESIS ORGANIZATION

Chapter II

is

a summary of material management and MIS

design theory that should be considered prior to designing

an

effective

Previous

material

studies

management

addressed

in

major

shortcomings

basic

theoretical

concepts

forms

by which

framework

information syster

of

the

Chapter

past.
of
an

information
III

When

summarize

combined

Chapter

II

analysis

the

of

system.

with

the
the

information

the management

is made in the remaining text.

Chapter IV begins with a brief background discussion of

the

Long

Beach

Shipyard

organization,

including

constraints under which managers operate.

moves
"ideal"

to

comparison

of

the

MM

important

The analysis then

application

against

framework created in Chapters II and III.

Chapter V completes the analysis with an overall

assesment
needs.

the

in

terms

Chapter

of

its

I'. then

ability

concludes

to
with

meet
a

system

management's
summary,

some

recomendations,

and

the

identification

topics.

of

future

research

II.
A.

A FRAMEWORK FOR ANALYSIS

BACKGROUND
In the 1970's, the average annual investment in business

inventories was $305 billion, or about eighteen percent of

the Gross National Product.
that

The annual cost of maintaining

inventory was between $128

and $170

billion in 1979.

[Ref. l:p. 356]

Trends in inventory management are changing

in the 1980's.

In a recent General Accounting Office (GAO)

study, which examined the inventory management practices of

seven private sector companies, it was discovered that top
managers
inventory

have

established

in the future.

goals

[Ref.

to

significantly

2:p. 1]

lower

The Department of

Defense (DOD), inspired by the Gramm-Rudmann-Hollings Act of

1985, has also been considering possible inventory reduction
methods
exist

for

its

between

management

activities.
DOD

and

principles

the

Although

different

private

sector,

practiced

by

motives

inventory

profit-making

organizations can be applied to the military (in particular

the public shipyard) to improve material management.
In this section, two fundamental research questions will
be addressed:
1.

According to modern material manageLent theory, what

information does the shipyard logistician require to
make sound material management decisions?

2.

What factors should be considered when evaluating a

management information system used by a material
management division?

Answers

to

analys7s

these

of

(SYMIS) as

the

form

will

questions
Shipyard

framework

the

Management

Information

it applies to material management

for

System

at the Long

Beach Naval Shipyard.

Before

constructing

organizations
productive

make

the

framework,

decisions

system

like

within

the

review

the

shipyard

of

context
will

be

of

how
a

made.

Additionally the systems approach to decision-making will be

studied

to

explain how automated

information

systems are

designed and how they can be helpful to management.

B.

ORGANIZATIONAL DECISIONS AND THE SYSTEMS APPROACH

Organizational

categorized

into

decision-making
two

types,

can

decisions

be

broadly

that

require

mathematical and quantitative techniques and others that are

qualitative in nature.

Quantitative decisions are the more

relatively understood of the two classifications and hence

are mostly relegated to the lower level of an organization
where

they

Qualitative

can

be

lecisions

routinely defined

monitored
are

by

usually

and therefore,

mid-level

more

reside

complex

managers.
and

not

in the upper and

middle management levels.

Management
designed

to

information

automate

systems

quantitative

(MIS)

are

processes

by

generally
applying

preprogrammed calculations based on the functions performed

8

by lower

level

computer-based
storage of
of

employees in their daily operations.

The

and

mass

MIS

rapid

processing

important data that are used to make both types

decisions.

making

for

allows

However,

involves

given that

individual

qualitative decision-

preference

and

affects

the

personal objectives of the organization's members, consensus

is difficult and programming even more so.
The

question

of

how

an

information

system should be

designed, therefore, is complex and widely debated.

Norbert

Weiner, who saw the information system as an integral part

of

an

organization, much

like the brain and the

nervous

system act as an information system in the human organism,

said,
...any organism is held together.... by the possession of

a means for the acquisition, use, retention,

transmission of information. [Ref. 3:p. 224]
A

system,

as

defined

by

Webster's

New

and

Collegiate

Dictionary, is "a group of devices or artificial objects or

an

organization

distributing

forming

network

especially

something or serving a common purpose."

for
The

linkage, connecting these devices create the system and the

"common purpose" establishes a boundary around the

linked

components.
The systems approach
and all of its components.

is

concerned with a whole entity

It recognizes the activities of

the components while simultaneously considering the entire

system activity for which they serve.
9

"The systems approach

is primarily a philosophy of structure that coordinates in

an

efficient

and

optimum

manner

operations within any system."

the

activities

[Ref. 4:p. 75]

and

This allows

for analysis of complex problems and situations because it

is concerned with the examination of individual components
emphasizing their role in the system rather than as separate
entities.
A particularly

useful

system

for

this

analysis

is

"productive system" whose function is to convert a set of

inputs

(materials,

information)

into

services).
subsystem
control

a set

The
to

personnel,

inputs
that

utilities,

desired outputs

productive

change

subsystem

of

capital,

system

into

uses

outputs

provides

and

(products and
a

conversion

monitored

corrective

by

action

a
if

necessary. [Ref. 5:p. 18]

Figure 1 depicts a comprehensive view of a productive
system where outputs take two forms:
lamps,

refrigerators,

etc.)

and

haircuts, repair services, etc.).

tangible (automobiles,
intangible

(education,

The shipyard application

of the model involves taking environmental factors such as

shipyard policy and budgets, market factors such as the Type
Commander's

desires and competition with other yards, and

resources and converting them into a repaired ship.

fleet support

service is controlled

10

Such a

by managers within the

INPUTS

CONVERSION
SUBSYSTEM

ENVIRONMENT

OUTPUTS

PHYSICAL (Manufacturing)

*Legal

*Political
*Social

LOCATIONAL (Transport)

*Economic

*Technical

MARKET
*Competition
*Product Info.
*Cust. Needs

>

RESOURCES
*Material
*Personnel
*Capital
*Utilities

EXCHANGE
(Retailing/Wholesaling)

> GOODS AND

SERVICES

STORAGE (Warehousing)
GENERAL SERVICE
(Private/Public)

Feedback
Information

CONTROL SUBSYSTEM <-

Figure 1.

shipyard

Productive System Model [Ref. 5:p. 19]

organization using

scheduling,

labor

use

and

information systems
material

flow

to monitor

throughout

the

process.
The

core

of

productive

system

is

its

conversion

subsystem which is present in some form in all organizations

whether their primary function is manufacturing or servicerelated.

This concept allows us to apply the principles of

production management

to a

service system.

11

[Ref.

5:p.

23]

By
models,

straight-forward

productive

into

systems

service

fitting

of

applications

system

production

management fundamentals that govern material management in

manufacturing

can

be

achieved.

Let's

now

examine these

fundamentals in detail and apply them to shipyard repair.

MATERIAL MANAGEMENT FUNDAMENTALS

C.

Materials Management is all of the management functions

related to the complete cycle of materials flows, from
the purchase and internal control of materials to the
planning and control of work in process to the
warehousing, shipping, and distribution of the finished
products. [Ref. 5:p. 18]
More and more organizations are centralizing the material
management

function

under

single

department

that

coordinates material activities and accepts respkqsnsibility

for performance.
Centralization
department

control

warehousing

function

that

material

inventory,

requirements.
must

requires

and

the

material

purchasing,
expediting

An effective management
to coordinate

these

management
logistics,
slow-moving

information system

activities

and provide

management with useful accurate material information.

Material
significant

purchasing, movement and storage

investment.

represent a

Depending upon the nature of the

business, materials exist in many forms.

In a production

environment material is held as:

1.

Raw Materials
The basic building blocks (steel,
bricks, aluminum, etc.) that will be used to construct
the final product.
12

2.

Work-In-Process Partially completed products awaiting

next production step or final assembly.

3.

Finished Goods
Final products that have yet to be
sold, usually held as a hedge against the uncertainty
of demands in the marketplace. [Ref. 5:pp. 444-445)

In

addition, materials

in the

logistics channel

are held

for four other reasons:

1.

Pipeline Inventory
Because transportation is not
instantaneous inventory ends up in the pipeline
between stocking points or finished goods warehouses
of final destinations.

2.

Speculation Inventory
Although not a factor in DOD,
inventories of raw materials with speculative value,
i.e., gold or silver, are held as much in anticipation
of rising value as for the needs of manufacturing.

3.

Regular or Cyclical Inventory

average demand during the time
replenishments.

4.

Safety Stock
Inventory held as insurance against
being out of stock because of varying demand and
replenishment leadtime, in addition to regular or
cycle stocks held. [Ref. l:p. 357]

Necessary to meet
between successive

Regardless of form or reason, the total dollar value of

material inventories in DOD have risen significantly in the
last ten years, a trend that must be examined and at least
slowed down.

"Just-in-time" (JIT) concepts are only one of

the mechanisms being used to combat rising inventories in

the

private

sector

that

may

have

service-oriented public shipyard.

an

application

in

the

JIT requires delivery of

the right material in the right quantity at the right time

and to the right place using minimum resources.
2]

13

[Ref. 6:p.

Just-in-time implies minimum inventory for the operation

In manufacturing and assembly operations work-

it supports.

in-process inventory levels would be held at zero or near

zero quantities.

In retail, service, and support operations

(including public shipyards) finished goods inventory levels

would

be

maintained

pipeline

delays

and

customer service.

at

an

amount

necessary

the

maintain

to

overcome

operation's

level

of

Therefore, when a part is needed on the

production line or to complete a repair, it arrives just in

time, but not before it is needed. [Ref. 2:p. 6]
Purchasing activities acquire the raw materials, parts,
machinery,

supplies

and

all

other

goods

required to operate the organization.

this

function

productive

is

vital

system.

to

services

The proper conduct of

material

Managers

and

flow

within

this

throughout
division

the
must

maintain accurate data on all available suppliers including

their delivery leadtimes and pricing information.

In the

DOD, particularly the shipyard, purchasing agents must be

familiar

with

material

availability

sources and commercial vendors.

both

from

government

To accomplish this, buyers

must have complete technical descriptions of requirements so

that the correct material is purchased.
The

first

step

in

controlling

inventory

levels,

therefore, rests with the purchasing division.

If buyers

can acquire materials

the right

of the right quality, in

quantity deliverable at the right time, then material flow

14

will be improved and levels of reserve material in inventory

can be lowered.
1.

Right Ouality
The

process

first

is

step

to obtain

in

the

and

cost

manufacturing

correct

perform the scheduled work.

suitability

the

parts

or

repair

and materials

to

Material quality is related to

(including

no

only

price

but

transportation, incremental costs, installation costs, etc).

[Ref. 6:p. 33]
According to Lee and Dobler quality is determined by
balancing

two

major

consideration

of

considerations:
suitability

and

(1) the
(2)

consideration of price and

availability.

coordinated

effort

the

ensure

correct

the

Materials-List
who

ensure

maximized.

between

material

the

engineers,

requested

(JML) and the material managers

the

economics

of

price

and

economic

This requires a

production
is

technical

on

the

who
Job-

(purchasing)

availability

are

After the technical decision has been made, the

buyer must determine if the materials selected can actually

be purchased

on a competitive and often continuing basis.

[Ref. 6:p. 35]

A material manager's responsibility with respect to
quality involves the right to challenge technical decisions
for economic reasons.

But, the ultimate right to determine

quality, including the right to change, correctly rests with

the department responsible for performance that is the user
15

of

the

material.

[Ref.

working

integrated,

6:p.

35)
for

together

If
the

management
common

goal

is
of

achieving the "right quality," then the challenge and change

procedure

between

the

material

and

the

engineering

departments should be one of cooperation, not conflict.

Communication
logistician

and the

and

cooperation

engineer is a key

between

the

factor to ensuring

that incoming material meets all requirements (suitability,

availability, and price).
be

met

by

available

If technical requirements cannot

sources

of

supply,

then

engineering

should consider modifying technical requirements or making

it "in-house."

If this is not feasible perhaps new sources

of supply can be developed by contracting vendors to create

the

material

in

accordance with

specific

technical

data.

(JIT) demands close cooperation with trusted vendors who can

supply exactly the right material when it is required, under
all circumstances.
Current
crucial

to

and

accurate

quality

specifications

are

specifications

determination.

detailed

descriptions

parts and components used to make

specific
controls

repair
are

task.

usually

By

targets

also

definition,
of

materials,

a product or perform a

Although purchasing
the

are

of

and

cost

inventory

reductions,

"material refusals" caused by improper specifications may be

of

more

refusals

significance

to

the

material

manager.

Material

(material purchased that cannot be used) are not

16

only

costly

in

direct

dollar

terms,

but

also

cause

production delays, increased administrative order costs, and

disruption

to

the

entire

production

schedule.

In

JIT

systems suppliers share in the loss (by paying some type of

penalty)

if

error.

the material

Therefore, there

refusal

is

the result of their

is a profit motive that ensures

quality.
2.

The Right Quantity

As

undergone

mentioned
a

earlier,

fundamental

significantly,

is

the

inventory

change
view

in

that

this

management
decade.

inventory

has
Most

should

be

maintained at the lowest level consistent with the operation

it

supports.

In the naval shipyard this means inventory

levels should be the minimum to support repair operations.

To achieve this objective, many companies are eliminating
various contingency stocks that were maintained in the past.
[Ref.

2:p.

6]

Therefore, planning and ordering

required

materials correctly the first time is crucial to the overall

management plan.
Managerial planning, organization, coordination and
control are essential for obtaining the necessary quantities
of

material

holding

to

costs.

support
The

production
inventory

and minimize

control

system

inventory
must

be

integrated with organizational goals and controlled within

the budget, production, planning and scheduling activities.

17

Ironically,
come

to

the

becoming

at

forefront

increasingly

time
of

when

inventory

industrial

difficult

to

control

management,
achieve

Because of the growing complexity of

this

has

it

is

goal.

the systems we build

and maintain, the dollar value of the average repair part is

increasing at an alarming rate.
invested

Therefore, the dollar value

in inventory is growing faster than the number of

items held.
easily

[Ref.

6:p. 257]

resolved

techniques.

even

More

This is a dilemma that is not

with

better

attention

to

material

management

requirements

planning,

especially when high cost items are being considered, may be

the only means by which the problem of rising costs can be
managed.
Buying the
natural

conflict

right quantity of material

of

objectives

between major

reconciles a
departments.

Usually, the production department desires a high inventory

because they assume it will
lowering production costs.
top

management

want

capital investment.
hand,

may

be

potential

Conversely, the comptroller and

inventories

while

which

represent

less

The purchasing department, on the other

ambivalent,

(i.e.,

inventories

low

minimize work stoppage thereby

quantity

recognizing
discounts)

simultaneously

the

cost

inherent

experiencing

reduction
in

high

departmental

inefficiencies from pursuing an excessively tight inventory.

It

is

effect

imperative
of

that

management

carefully

different approaches to their

18

consider

the

inventory problems

and adopt policies which balance its two major objectives:

(1) to

minimize capital

investment

in

inventory;

and

(2)

minimize work disruption while sustaining quality.

As alluded to earlier, it is theoretically desirable
to create an economic balance between the quantity of items
in inventory, the frequency of purchase order transactions,
and the quantity of
models

attempt

to

items per order.

create

such

Inventory management

a balance by

examining how

inventory levels vary over time in order to determine what

quantities

of

material

should

be

purchased.

Figure

presents one such theoretical inventory model.

The

common

terms

used

to describe basic

inventory

principles are defined briefly below:

1.

Operating level describes the quantity of required

materials to support normal operations in the interval
between material orders and receipts.

2.

Safety stock is used to allow for unexpected demands,

procurement leadtime, and unforeseen delays.

3.

is
Reorder
cycle
successive orders.

4.

Procurement leadtime is the period of time from the

date material is ordered until it is received. It
usually includes:

5.

interval

the

of

time

between

a.

Administrative time to complete required

paperwork, and ensure adequate government
contracting requirements are met;

b.

supplier prodnctin. leadtime is sufficient

if the material must be manufactured; and

c.

delivery leadtime, including shipping time.

Order point is the time when orders are initiated for

additional quantities of mdterial. [Ref. 7:pp. 56-57]
19

Rieorder Cycle

,i

t
Lei dhm.

O )

R..kc,:lr:

of Slipli,,

Piea i.

Collstlns ption

Order:

_=e

Sa fetyN

Stock

S.,fet'
Level
Zero Stock
Periods of Time, Days

[Ref. 7:p. 56]

Theoretical Inventory Cycle

Figure 2.

According

to

Figure

the

2,

to

is

goal

the

have

correct amount and type of material available at the lowest

cost.

decision

economic

The

placed.

whether

to

with

vary

costs

Procurement

inventory

place

many

the

number

principle
orders

of

orders
the

optimizes
fewer

for

items,

resulting in high acquisition costs, or to place orders less

frequently for
of

larger quantities resulting in higher levels

along with

inventory

the associated

holding

costs. The

economic order principle equates "cost to order" and

to

hold"

and

minimized
Graphically,

the

point

indicates
this

at
the

economic

which

the

optimal
order

Figure 3:

20

cost

combined
order
is

"cost

costs

are

quantity.

represented

in

h1nenor.N Holding
j

TQ, -' Co%:

: =
Toulo "

,' (o

(j,Q

7Q
( u s : o f O rd c rs

- D

=r

Lot Size Ordered

Figure 3. Economic Order Cost [Ref. 7:p. 58]

The total cost curve in Figure 3 is expressed as:
TOTAL COST = 1/2(ChQ)

where,

+ CpD/Q

Cp = Average ordering cost (dollars per order)

Ch = Inventory carrying cost
D = Annual item demand
Q = most economical quantity

By differentiating and setting the equation equal to

zero and solving for Q, the following equation, known as the
"economic order quantity (EOQ)," results (Ref. 7:pp. 58-59]:
Q* = EOQ =

(2CpD/Ch)I1/

The EOQ model makes no allowance for uncertainties

in inputs to the inventory decision problem.

For example,

when the level of demand is random it is usually economical

a certain

to provide
against
inventory

the
and

level

unexpected
cause

and

of

demand

safety stock as
that

"out-of-stock"

Figure 4)

21

could

insurance

deplete

condition.

the
(see

0
R

0
tockout

r--LT--

-Sockou,

LT

l-I-LT-

= order quontity

Time

LT = leod time

R = reorder point

EOQ Model with Demand Uncertainty [Ref. 1:p. 381]

Figure 4.

overcome the

To

basic EOQ

beyond the

calculated

by

adding

estimates

that

are

control

between
in

shown

as

demand),

point

time

the

Reorder

forecasted

based

the

utilizing

by

distributions.

probability

during

formula and determine the amount of

required,

stock

safety

one must go

of demand

uncertainty

on

demand

distributions
and

reorder

Figure

The

4.

are

then

safety

stock

points
plus

of

principles

of

receipt
automated

the

demand

(leadtime
inventory

system detects when stocks fall below the r-order

and places a replenishment order automatically when

requested the inventory manager. [Ref. 1:pp. 410-411]

Since
terms

of

inventory

inventories

material
levels

is

and

a large

represent
control

essential.

systems,
In

investment

in

management

of

timing

of

addition,

material deliveries, especially for items which are not held

22

in

inventory,

is also

of concern

to the

shipyard material

manager.
3.

The Right Time

The Production Department and the Supply Department

share a common interest in the timing of materials flow into

production.

The material manager influe-nces the production

schedule

through

schedule

affects

467]

From

inventory
the

an

policy,

average

while

inventory

organizational

the

production

level.

efficiency

[Ref.

l:p.

prospective,

inventory costs and those production costs directly affected

by inventory policy must be balanced through an integrated
material

management

strategy.

The

logistician

must

be

involved in the production scheduling process if the timing

of

material

flow

is

going

to

meet

the

demands

of

the

Production Department.
Generally,

the material

meeting customer demand

He

or

she

techniques

may

either

may be supplied
the

material

levels,

for raw materials and spare parts.

time material

as material

Japanese method of

deliveries

requirements planning

using such

(MRP) or

the

just-in-time.

Or, production materials

through material

inventories maintained by

department

reorder

manager has two methods of

in which

frequency,

material

handling

inventory

policy.

economic

requirements
These

case,

order
are

techniques

23

required

inventory

quantities,

specified
(MRP, JIT

and

through

and

EOQ),

although different, are often combined to achieve desired

customer service levels. [Ref. l:p. 470]
a.

MRP vs. JIT

One

of

the

most

often

implemented

techniques

developed to deal with the unique problems of manufacturing

It incorporates the production schedule

inventories is MRP.
into

the

material

ordering

process

by

obtaining

the

production requirements from the bill of materials for each

scheduled job and plans material orders so that they arrive
exactly when needed by the Production Department.
Texts

and

papers,

advocating

the

benefits

of

Material Requirements Planning, imply, however similarities

between it and just-in-time.
other

in

the

way

they

productive system.
toward the final
regardless

In fact, the two oppose each

create

material

flow

through

MRP is a system which "pushes" material

product according to forecasted leadtimes

of

the

individual

shop

capacities

enroute

whereas, a JIT production system controls material flow by

"pulling"

it

through

work-in-process

production

inventories

stations.

This prevents

from accumulating

in

front of

bottlenecks.
The results, therefore, vary greatly between the
two approaches.
balanced.

That

Under MRP the load on the system is not

is,

resources

are

sent

to

job

sites

regardless of the ability of the site to perform the work.

Instead

of

scheduling

material
24

resources,

MRP

may

cause

overloads in certain time periods even when there is enough

capacity

on

This

average.
shops.

individual

By

often

to

tends
MRP

itself,

overload

creates

its

the
own

"scheduling bottlenecks" and is limited, in practice, as a

production planning tool.
b.

MRP Fundamentals
MRP provides the logistician a means by which he

or she can avoid holding excess inventory.

Theoretically,

inventories do not need to be created when the quantity and

timing of the end product are known.

Therefore, MRP is an

important alternative to inventory control as a method of

having the right materials in the right place at the right
time.

In fact, statistical inventory control (that is, EOQ)

methods

do

channel

as

not

perform

they do

as

well

in

the

in the physical

physical

supply

distribution channel,

because the assumptions on which they are based are often

not met

(see pages 17-23).

independent,

and

That is, demand is not random,

unbiased.

Rather,

demand

patterns

for

manufacturing materials are derived. [Ref. l:pp. 471-472]

Derived

demands

result

from the manufacturing

process because, in most cases, a predetermined number of

required materials are specified by the bill of materials.
In

high

lumpy demand
methods

are

leadtime

production

patterns.
used

to

set

If

environment

statistical

inventory

this

creates

inventory

control

levels,

the

inventory

levels would be unacceptably high due to the variance of the

25

demand

lumpy

depletions

can

be

roughly
to

accordingly

ordered

If

patterns.

timing

the

anticipated,

materials may

be

savings

in

substantial

realize

inventory

of

inventory carrying costs. [Ref. l:p. 472]

The

MRP

methodology

begins

with

the

bill

of

materials that defines the quantity relationship between the

materials
job).

and

If

the

it

accomplished

end

is

and

product

known

in

when

what

(i.e.,
each

a completed
repair

quantities

job

repair

will

be

repair materials are

required to complete the job, then an acquisition schedule

for the materials can be developed.

The advantages of such

are:

horizon;

(1)

an

extended

planning

flexibility with changes

providing

the

material

in the master
manager

the

(2)

schedule;

opportunity

system
and

to

(3)

shift

delivery and reorder times either forward or backward.

[Ref. 8:pp. 49-50]
The

flow

of

materials

is

controlled

by

offsetting the purchase or requisition from the requirements

by

the

known.
and

extent

of

the

leadtimes

which are

assumed

to be

However, uncertainty in the level of requirements

material

transportation
approach,

leadtimes
delays

therefore,

and
must

is

always

partial
be

realities. [Ref. l:p. 477]

26

present

shipments.

modified

to

as

are

The

MRP

handle

these

c.

Demand Uncertainty
Using MRP under conditions of demand uncertainty

requires that some safety stock be kept to protect against

unpredictable requirements fluctuations.

A fixed, on-hand

inventory level, determined by practical experience or some

other means,

is

one

common

alternative.

Once

a minimum

quantity is established, requisitions are triggered in the

normal MRP manner except that the on-hand quantity drops to
the

established

minimum

rather than

to

zero.

Given the

peaks and valleys of derived demand this approximation is

likely to be sufficient in this situation.
Material leadtimes, like demand, are not likely
to be

known with complete certainty.

under-stocking,

requests

for

To prevent over-or

materials

conditions must be correctly timed.

under

these

For example, suppose

that the average purchase leadtime for 1/4" gate valves is

normally

distributed

with

a mean of

standard deviation of three days.

fourteen days

and a

There is a penalty cost

for delaying or interrupting production of $5,000 per day

for

each

gate

Additionally,

if

valve

that

gate

valves

does

not

arrive

arrive

early

in

they

time.

must

be

stored in a warehouse at a $50 per day holding cost.

The
additional

time

question
should

here
be

is

planned

to

determine
into

the

much

requisition

schedule to compensate for leadtime uncertainties.

27

how

Let us

call the time T* and establish it as a point on the leadtime

distribution shown in Figure 5 below:

T*
Pr

purchase order LT
probability of not

having material
when needed.

L rr

14
r"

Figure 5.

Leadtime Distribution [Ref. l:p. 479]

T* can be found by determining the probability

(Pr) of not having a gate valve available according to:
Pr = 1 -

(Pc\Cc+Pc)

where,
Pc=cost of having materials after they are needed
($per unit per day)
Cc=cost of having materials before they are needed
($per unit per day)
Then, the order leadtime (T*) is:
T*

= LT + ZS

where,
LT=mean leadtime (days)
S =standard deviation of leadtime demand (days)
Z =number of standard deviations between LT and T*
28

Using the example data,

Pr = 1 - (500\50 + 5000)
= 0.01
Z @ 0.01 = 2.33 Therefore,

T* = 14 + (2.33)(3)
= 21 days before production.
[Ref. l:pp. 477-480]

material

Theoretically,

under

these

conditions

should be ordered 21 days prior to production and it should

arrive in time for production in 99 cases out of 100.

Of

course, to be able to determine leadtime distributions and

apply

these

place

that

principles,
can

gather

tracking

and

process

historical vendor delivery data.

parts

required

for

ship

mechanism
material

must

be

leadtime

in
and

Due to the large number of

repair and the numerous suppliers

involved, this function should be automated and imbedded in

a material management information system.
d.

JIT Fundamentals
JIT

control

the

flow

was developed to give management a means to

of materials

the production system.

and inventory

Under the right circumstances it:

1.

stimulates productivity improvements,

2.

reduces inventory, and

3.

reduces leadtimes.

Its

application,

levels within

however,

requires

production

schedule

that is repetitive and that operates at a constant rate for

a

long

time.

JIT

cannot

generally

29

respond

rapidly

to

irregular product changes and is intolerant of fluctuating

While JIT advantages are tempting to any

production rates.

manager who is trying to control costs, its application in a

non-manufacturing environment may be somewhat limited.
Hybrid

systems

that

combine

fundamentals

may

situations.

Service organizations,

just

as

be

useful

concerned with

in

these

and

JIT

non-manufacturing

like

lowering costs,

reduction, as the manufacturer.

MRP

a shipyard, are
through inventory

In the short term, MRP can

solve long leadtime raw material ordering problems.

given

the

complexity

and

certainty

of

the

ship

But,
repair

function, not all of the material requirements are known in

advance of disassembly.
carried as
deliver

a safety measure to prevent work stoppage and

the

combination

Therefore, some inventory must be

ship
of

on

the

schedule.

principles

In
of

the

MRP,

long

JIT

and

run,
EOQ

a
may

provide the solution to this complex shipyard problem.

e.

Other Material Management Considerations

Besides managing inventory flow through the use

of MRP and JIT principles, GAO has also discovered in their

studies that inventory accuracy goals of successful private
companies

have

become

operating manaqers.
throughout

the

year

day-to-day

concern

for

their

Many companies are counting inventories

rather

than

annual "wall-to-wall" inventory.

30

during

the

traditional

Instead of completely closing down operations to

conduct inventory counts, many companies have adopted cycle
inventories.

Under this procedure, a physical inventory is

taken on every item at least once a year, with more frequent

counts performed on selected items such as
expensive goods.

fast movers or

Cycle counting allows a company to expose

transaction and human error patterns while simultaneously

verifying accuracy. [Ref. 2:p. 9]
GAO found that companies who
counting not only
inventory

increased inventory accuracy but,

discrepancies

reconciliation much easier.

stocks,

essential

levels,

showed

implemented cycle

to

sooner

thereby,

found

making

Additionally, company service

maintaining

improved

high

accuracy

and

customer
made

service

management

personnel more aware of their operation. [Ref. 2:p. 10]

Improved
functions

within

suppliers

and

coordination

the

company

customers,

are

successfully run businesses.

reduce
levels,

inventory

while

must establish

their peers

of
and

also

between

management

it

important

and

aspects

its
of

Logistics managers, seeking to

maintaining
integrated

in production, design,

The maximization of

inventory

high

customer

service

planning processes with

finance,

and planning.

customer service requires that supply

departments know what production needs and when the planners

want it to be there.

This requires coordinated planning by

all cognizant department heads.

31

Inventory management based on the just-in-time

concept requires
its

suppliers.

close coordination between a company and

GAO

that

revealed

most

private

sector

companies surveyed were establishing more partnership-like

longer term

relationships with suppliers by offering them

including

contracts

that

clauses
product

delivery performance,

packaging,

required
and

quality,

penalties

for

In addition, private firms

non-conformance. [Ref. 2:p. 15]

are reducing the number of suppliers and are ordering fewer

items at higher frequencies.
Although government contract regulation and law
precludes preferential treatment of any contractor, it does
provide for award criteria based upon delivery performance
and

that

contracts
performance
commonly

The

quality.

product

reward

established

used

material

use

of

contractor

cost-type

quality

to provide indefinite
closely

may

and

incentive
delivery

delivery of

approximate

this

JIT

company-supplier relationship found in the private sector.

Finally, operating discipline and accountability
should be available to top management through performance
measurement.

In order to make routine decisions required

to apply just-in-time principles and lower inventory levels,

timely

information

critical.

is

information to managers at

private

must

provide

all levels of the organization

with equal timeliness and accuracy.

successful

Systems

sector

Many systems in use by

companies
32

automate

routine

managerial

decisions,

freeing them

to

concentrate

on the

exceptions. [Ref. 2:p. 17]

Performance

measurement

provides

another tool to improve material management.

managers

yet

In the private

sector individual managers or departments are measured by

return on investment and profit or loss.
by

material

deliveries

categories,

processing

Inventory levels

backlogs,

are just some of the measures

and

late

in the shipyard

that can be monitored to analyze effectiveness and provide a

basis

for

corrective

action.

Whatever

the

objective,

whether it be profit-making or cost reduction, the decisions

that face the material manager are complex and varied.
and

economic

variables

order

and

are

hand.

The

manual

computation

management

gather,

calculations

encompass

many

far too complicated to be performed by

personal

savings

techniques.
adequate

quantity

MRP

cost

would
that

and

time delay

more

tnan

could

be

offset

gained

associated with
any
by

inventory

using

these

Therefore, the material manager must have an

automated management
store,

effectively

and

apply

information system that

assimilate
the

data

if

theoretical

he

or

she

concepts

is

can
to

thusfar

ment.oned.
As

shown

earlier

in

Figure

1, supervision

is

performed by a control system which often takes the form of

an automated information system.

Information gives managers

a means of monitoring each system facet and its contribution

33

Information is the glue

to the overall production effort.

Without it, the flows

that holds the organization together.

and processes that combine to produce an output would cease

to function effectively.
an

of

assessing the usefulness

In

information

system in terms of material management, one must consider

some of the theoretical factors that are generally used to

factors

these

information

a management

characterize

section these

and

how

do they

In

apply?

and their

issues,

What

system.

are

following

the

application to the

naval

shipyard, will be discussed.

D.

ORGANIZATIONAL INFORMATION SYSTEMS

is

Information
operating

level

of the

depending

differently

used

therefore,

Information,

user.

upon

the
is

broadly categorized into two groups, operational information

and management information.
Operational

used

is

information

routinely

to

conduct

day-to-day organizational tasks such as calculating payroll

and

updating

information

example,
routes

supports
at

functions

inventory

all

decision-making
levels.

management

determining
or

the

the

calculating

Whereas,

records.

costs

of

economic

for

all

includes

for

process
It

alternate
order

management

distribution

quantities

for

maintaining inventory levels.

Information

systems,

which

are

usually

computerized,

produce both operational and managerial information.

34

While

the creation of operational information is no more than the

automation

information from these systems,

standard,

that

system

information

routine,

and

derivation

the

tasks,

of manual

is much more complex.

current

on the

reports

An

provides

operations

supports

compilation of daily transactions.

module,

of management

created

from

A management information

other hand, provides

customized data

that

meets decision-maker neeus drawn from both routine internal

transactions

and

data

from

sources

outside

the

organization.
A management

information

system

(MIS) can

be defined

according to the types of decisions it supports.

Processing

inventory transactions and reordering optimal replenishment

quantities, for example, are structured decisions which can
be

made

automatically

unstructured

decisions

by
are

the

system.

supported

by

More

complex

computers

that

perform rapid calculations and produce management reports.

These

outputs

are the tools which enable the managers to

make their decisions.

Building upon this concept, K. J. Radford proposed broad
specifications

of

an

information

system

to

serve

the

organization decision process:

1.

Administrative and Operational Systems serving routine

decision processes such as personnel administration,
production scheduling, and so on;

2.

Management Reporting Systems providing periodJ,

structured reports to managers based on summary data
froL, the administrative and operating systems;
35

3.

Common Data Base which stores data and information

used by more than one part of the organization;

4.

Information Retrieval System from which historic data

and information may be retrieved for use in planning
and decision-making;

5.

and a Data ManaQement System which arranges and

controls the flow of data and information between
components of the information system. [Ref. 3:pp. 225226]

1.

User Interface
For

analysis

characteristics

purposes,

make

up

one

must

decide

satisfactory

what

management

information system and whether they are active in the system

being evaluated.

Regardless of the environment in which the

MIS is operating, the primary design consideration should be

its interface with the user.

Interface

is concerned with

screens, keyboards, reports, languages, and other means by

which a human user and the computer system exchange inputs
and outputs.
Users can be classified by their

level

of system

experience and their general knowledge of computer concepts.

Ideally, a system should be flexible enough to allow both
novice

and

expert

information on

use.

should

them to assist the beginner

moves through the system

adequate

Screens

flexibility

have
as

enough

he or she

functions, but, should also have

so

that

the

expert

may

bypass

unnecessary instructions and still perform the tasks. [Ref.

9:pp. 530-533]

36

Scr-en design should therefore be clear and free of

irrelevant

information.

Galitz

[Ref. 10],

making

or

the

It

to

contain, according

should

only information essential to decision-

performance

of

an

action;

and

it

should

provide all data related to one task on a single screen.

In

other words, the user should not have to memorize data from
a previous screen to use the current one.
In

an

Satisfaction,"
1977,

Schewe

article

entitled,

"Guide

to

MIS

User

in the Journal of Systems Management of June

and

Weik

provide some

characteristics

of

management information system that are considered important

to the system user:
1.

depth of information,

2.

width of
information,
the number
information categories in the database,

3.

analytic sophistication, system capability to analyze

data,

4.

access delay time,

5.

response time,

6.

completeness of data input, the capability

system to retrieve all requested information,

7.
8.

information overload, the amount of unnecessary

information given the user,
information currency, the degree to which the data
base is up to date,

9.

output accuracy, and

10. output complexity (difficulty

output). [Ref. 10:p. 76]

37

in

of

different

of

interpreting

the

the

From this list those characteristics most important

to management will be the focus of the analysis along with
the material management fundamentals discussed earlier.

The

condensed list includes:

1.

analytic sophistication

2.

information overload

3.

information currency

4.

output complexity.

Within the system context, the thesis will examine how the
shipyard

material

management

division

uses

the

interface with other departments and divisions.

MIS

to

An analysis

of the system effectiveness will be made by comparing what

information is required with that which is provided by the
SYMIS.

Additionally, it will be shown that new methods of

material

management

may

be

needed

to

improve

accuracy and reduce excess inventory levels.

inventory

The impact of

these changes on the current system configuration will be

assessed to determine recommendations for future changes.
Before turning to the analysis,
recent

studies

concerning

shipyard

a review of some

management,

growing

inventory levels, public/private competition, and trends for

the future will be made.

As budgets are cut to respond to

growing federal deficits

the cost saving measures proposed

in

these

studies

must

be

given

serious

consideration.

Reform must not be a "band-aid" to cover up symptoms

underlying

system

problems;

rather,
38

it must

of

be carefully

orchestrated by the highest levels of management to cure a

navy-wide problem of
shipyards.

New

material

ideas

for

inventory management, material

design must be considered

waste by the public

more

efficient

sector

methods

of

flow and information system

if the

these studies are to be remedied.

39

conditions described in

III.

A.

SCOPE OF THE MATERIAL MANAGEMENT PROBLEM

[PREVIOUS STUDIES 1

"MUCH ADO ABOUT MAINTENANCE"

Since

1978,

management

have

numerous
been

studies

conducted.

of
The

shipyard
General

material
Accounting

Office, and several contracted commercial consultants have

found many discrepancies in shipyard inventories.

In fact,

the volume of discrepancies is so great that those who must

solve them are overwhelmed.
Rather than
lists, the

add to

this

proliferation of discrepancy

objective of this section is to summarize the

research done to date and attempt to form a general material

management problem scope.
In

June

1989,

Secretary

of

Defense

Cheney

made

statement establishing long term goals to cut thousands of

low-level acquisition jobs and attack the "perennial spare
parts problem."

In a The Wall Street Journal article of

June

GAO

6,

1989,

"...military

officials

were

reported

to

say,

stockpiles of excess or unusable spare parts

around the world...have now topped $29 billion, up from $10

billion in 1980."

In that same article, Representative Les

Aspen, democrat of Wisconsin and Chairman of the House Armed

Services Committee, said

"Study after study has diagnosed

the same problems and prescribed the same remedies."

ll:p. A-24]

[Ref.

The question to be addressed here is; What are

40

these problems, and specifically how do they affect material

management in the naval shipyard?
As Mr. Aspen noted, no matter who performs the study,
they usually call out the same general problem areas.

The

areas, listed here, common to most shipyard studies will be

examined below:

B.

1.

Shipyard Material and Workload Planning

2.

Material Management Information Systems

3.

Procurement Constraints

4.

Inventory Management

5.

Supply System Constraints.

SHIPYARD MATERIAL AND WORKLOAD PLANNING

According to a GAO study conducted on 105 regular ship

overhauls performed

in private shipyards

from fiscal

year

1982 through May 1985 overhaul costs increased significantly

between contract award and contract completion.
in

contract

costs

resulted

from

contract

Increases

changes

for

additional work that was not anticipated at the start of the

overhaul.

According

to

the

interviewed, growth work accounted

Navy

representatives

for seventy-six percent

of the cost increases on fixed price contracts and sixty-six

percent on cost type contracts. [Ref. 12:p. 1]

It is clear

that no matter who does the planning or the work, shipyard

repair is difficult to predict with reasonable accuracy.
An

outside

shipyard

observer,

management,

who

would

is

unfamiliar

probably
41

make

with
a

public
logical

assumption that when a shipyard estimates the cost of an

overhaul

it considers all

possible cases

(best to worst)

based on past experience with overhauls of similar vessels.

Additionally,

one

would

assume

that

managers

carefully

review historical demands for spare parts and construction

materials

along

with

vendor and

supply

system

leadtimes,

trying to coordinate material arrival with the anticipated

start of a particular overhaul job.
Contrary to this assumption, GAO discovered,
1978

and

again

material was
for

in

1985

that

historical

data

first in

for

direct

incomplete, inaccurate and not being utilized

material

planning.

Without

accurate

usage

data

shipyards continued to order materials for future overhauls

that

were

result,

not

actually

unused

material

required.
stocks

[Ref.

13:p.

increased

by

percent during the period 1979 to 1983.

recent

visit

to

Long

Beach

Naval

4]

As

sixty-three

In fact, during a

Shipyard

(May

1989)

computer records showed an excess material inventory value

of $30 million, which represents over fifty-four percent of
the total inventory value ($55.2 million).
Coopers

and

Lybrand,

who

were

contracted

by

the

government to uncover shipyard management problems, stated

in their recent comprehensive study:
Shipyards do not have an effective planning base from
which to establish accurate material requirements for
ship availabilities or to measure actual performance of
material ordering vs. material usage. [Ref. 14:p. MM-3]

42

Coopers
excess

and

Lybrand

material

materials

found

that

inventories

planning

in

in

impeded

addition to

dollar

terms,

shipyard

inflating

ineffective

operations.

Poor

planning created a more difficult management task due to the

increase

in

the number of

line items to be managed.

addition, more indirect personnel were

purchase,

expedite,

receive,

In

required to order,

warehouse,

distribute

and

eventually dispose of (excess) material.

There was
an
intermittent
idle labor cost when
Production was impeded for lack of material with no
'work around;' there is a continuing indirect labor cost
for personnel managing excess material that is never
needed. [Ref. 14:p. MM-4]
Prior
Material

to

February

had

to

be

availability.
single

date

on

1988

policy

change,

all

Direct

hand before the start of a repair

This policy

drove materials planning by

and disregarded unnecessary

inventory holding

costs.

Despite the change, material planners are still not

guided

by

the

leadtimes.
material

overhaul

Rather,
requirements

scheduling

the

Planning

based

on

system

and

Department

the

total

material
determines

work

package

regardless of the start and stop times of the jobs for which
they

are

ordering

associated with
sourcing
and/or

with

individual
no

required

Department,
determine

material.

delivery

material

Lists

jobs are released

consideration

requisition

because

Job-Material

dates

for

priorities
planning
43

for material

procurement

(RDD).

For
are

is

not

(JML's)

leadtimes
the

Supply

difficult
tied

to

to
the

automated

production

fundamentals,

schedule

outlined

within

in Chapter II,

SYMIS

as

the

require.

MRP

Therefore

material delivery is expedited for items not required until

later in the production schedule, while critical production
material

is

process.

Unnecessary costs are incurred for warehousing and

often

overlooked

maintaining

inventory

production.

The

thereby

before

result

is

disrupting

they

are

increased

work-in-

required

indirect

for

personnel

costs that contribute to higher overhead costs. [Ref. 14:p.

MM-6]
C.

MATERIAL MANAGEMENT INFORMATION SYSTEMS

The shipyard manager needs information in usable formats

to measure past performance, assess current performance, and

plan

future

work

and

resource

information

systems

at

utilized

collect

and

to

business data.
processing

is

requirements.

naval

shipyards

process

Management

are

both

primarily

engineering

and

Under the organization at Long Beach, data

the

principal

function

of

Code

110.

They

provide centralized data processing support for business and

logistics

systems.

responsibility

of

Engineering
the

design

data

is

division

generally
(Code

the

240).

Engineering data, however is beyond the scope of this study.

Coopers and Lybrand
effective
obsolete

and

efficient

hardware,

inconsistent

found that "shipyards do not have

lack

information
of

leadership,

systems,"

comprehensive
ineffective
44

MIS

citing

planning,

organizational

structures,

and

contributors.

complex

[Ref.

acquisition

14:p. MIS-i]

process

major

MIS hardware upgrading

was outlined as a "total package" in the study.

required

as

The plan

formulating an overall MIS strategy, upgrades of

both hardware and software and a greater emphasis on system

training at all organizational levels.

According to Coopers

and Lybrand, if modernization is to be successful in terms

of increased productivity at lower cost, the business and
engineering functions must be integrated.
D.

PROCUREMENT
Although specific contract regulations and statutes are

beyond the scope of this study, they are critical to the

material management problem.
studies,

were

requirements

found
of

to

Procurement systems, in past

lack

provisions

commonly-purchased

to

items

consolidate

to

eliminate

acquisition costs and take advantage of quantity discounts

and bulk transportation rates.
generally

found

to

be

Procurement personnel were

excluded

from the

decision-making

process primarily because the automated systems used did not

provide

access

to

performance data.
vendor

performance

sources of supply.

current

procurement

history

or

vendor

Finally, past studies also revealed that

data

was

not

being

used

to

evaluate

Instead, competition and lowest bidder

were the primary considerations when selecting a supplier of

material not stocked by the government supply system.

Often

material received under these circumstances did not meet the

45

manhour expenditure and delayed the

caused additional

This

rejected and reordered.

of production and was

requirements

production schedule.
E.

INVENTORY MANAGEMENT
Inventory

extensively
thesis.

researched

policy

by

LT

at

Rory

Ndval

shipyards

Souther

in

was

graduate

Commenting upon previous studies and the resulting

corrective
increased

management

actions

taken

management

by

NAVSEA,

attention

in

he

the

pointed
area

out

of

that

inventory

management area has reduced the growth rate of inventories

across all shipyards.

(Ref. 15:p. 91]

Historical material usage data, that was previously not

used for planning, is now being collected.
the

material

manager

determine

material

This data helps

requirements

and

estimate when the material will be required for production.

It

was

believed

eliminating

that

early

this

would

deliveries

reduce

and

inventory

by

requisitions

for

unnecessary material.
Despite
significant
Beach

these
problem

still holds

Management's
planning.

efforts,
in

$30

the

material

shipyard.

For

million of

concern and
Obviously,

excess

example,

excess material

their use of

historical

remains

data

is

Long

even with

historical data

usage

not

for
the

complete solution to the excess inventory problem.

Recent policy changes have established performance goals
for Direct Material usage, service level, and stock turn for
46

Shop

Stores

production

Material.

material

The

available

requirement
prior

overhaul has also been removed.

to

to

the

have

start

all

of

Additionally, each shipyard

is required to establish its own goals and procedures

controlling

and

lowering

an

inventory

accounts.

[Ref.

for

15:p.

92]
The theme which underlies the studies of the past decade
is that investment in inventory is too high.

Safety stocks,

particularly in the Shop Stores account, could be reduced by

relying more on stocks of standard materials held at nearby
Navy

stock

points.

Historical

usage

data,

procurement

leadtime information, consolidation of requirements

in the

Ship Stores and improved communication with suppliers would

all serve to lower inventory levels.
interdepartmental
planning,

production

communication
and

material

In addition, improved
particularly
would

improve

between
material

delivery timing and reduce material rejections.

F.

SUPPLY SYSTEM CONSTRAINTS

The

final

criticized

area of materials management

in past

that has been

studies is the supply channel used to

obtain standard stock materials.

Generally, supply sources

include

the Navy's own system managed by the Ship's Parts

Control

Center

(SPCC),

the Defense

Logistics Agency

(DLA)

which supplies material common to all services, and outside

vendors who supply non-standard materials not available at
SPCC or DLA. [Ref. 14:p. MM-24]
47

Coopers and Lybrand were critical of Navy and DOD spare

parts-provisioning
designed

to

policies,

support

citing

shipyard

that

they

overhaul

were

and

not

repair

requirements for hull, mechanical, and electrical equipment.

Many of the Allowance Parts Lists (APL's) developed for navy
equipment

contain

requirements

for

organizational

level

repairs but are not broken down into depot level piece parts
support.

bnipyard-specific material is not stocked at the

supply centers unless identified by a special program.

When

shipyards make demands on the Federal Supply System stocks,

they

may

exceed

organizational

level

expected

demands

requirements.

from

combined

Additionally,

studies

have shown that materials received from SPCC and DLA do not
meet form or fit requirements and often, even though stock
numbers were the same, were not interchangeable.
The studies have been numerous since the late 1970's and
the corrective action process has continued with each one.
Naval shipyard material management will always be difficult
and certainly

will never be perfect.

With the framework

constructed and the scope of the problem examined, the MIS

at Long Beach will be explored to determine whether or not
it

is providing the material manager with the information

needed
material

to

implement
flow

to

the

support

corrective
production.

actions
The

and

improve

analysis

will

attempt to show if SYMIS has developed along with the wide

48

range

of

policy

and procedural

needs to be modified.

49

changes

or whether

it

too

SYMIS AND THE LONG BEACH NSY ENVIRONMENT

IV.

Before we can analyze SYMIS, the environment in which it

operates

must

be

established.

To

accomplish

this,

two

additional research questions will be addressed:

A.

1.

What policies at
decision-making?

2.

What are the capabilities and limitations

current MIS material management function?

the

shipyard

influence

material
of

the

LONG BEACH NSY MISSION AND ORGANIZATION

The mission of Long Beach Naval Shipyard is to provide
surface
ships
of the U.S.
Pacific Fleet with
production, engineering, logistics, and facilities
maintenance resources
to accomplish ship repair,
overhaul, modernization, activation, and specifications
at a fair and reasonable price within the designated
scheduled time frame. [Ref. 15:p. 1)

To this end, the shipyard is organized as shown in Figure 6

with the Supply Department (Code 500), primarily responsible
for material management (Figure 7).
The Supply Officer

(Code 500)

reports directly to the

Shipyard Commander on all material matters.

by

five

major

subfunction
(Logistics
Material).
Control

division

under
Systems,

each

purview

Control,

of

of

whom

the

Purchasing,

performs

Supply

Officer

Technical,

and

Because of their complexity, the Material and

Divisions

deputies.

the

heads

He is assisted

These

as well as
positions

Code 500 each have civilian

were

50

designed

to

provide

a
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a'a
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h1

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44

5O

00

h.

16P

552

S.

continuity

operations

of

when

respective

the

military

division heads are transferred.

"Efficient

and

effective

management

of

industrial

materials," is critical to the organization's success. [Ref.

15:p. 1]

Policies filtering down from all echelons of the

shipyard hierarchy are designed to promote better financial

management

of

industrial

materials

performance at competitive cost.

these

policies

to

see

how

and

on-tirn

quality

Let's now briefly look at

they

influence

the

shipyard

manager.
B.

SHIPYARD MATERIAL MANAGEMENT POLICY SUMMARY

Responding

to

all

of

the

recent

Naval

Sea

Systems

Command policy revisions alluded to previously, the Shipyard

Commander

at

Instruction

NSY

4400.4

"establish

Long
on

June

policies,

responsibility,

Beach

and

issued

3, 1989.

identify
establish

NAVSHIPYDLBEACH

Its purpose was

functional

performance

areas
goals

to
of
for

effective and efficient management of

industrial materials

within

[Ref.

Long

Beach Naval

addresses

the

receipt,

storage,

disposition

of

functional

Shipyard."
areas

issue,

excess

of

material

inventory,

material,

16:p.

and

1]

It

requisition,

accounting

provides

and

performance

measures to assess material management effectiveness.

The

instruction

is

divided

into

four

areas:

Shop

Stores (SS) ; Direct Material Inventory (DMI) ; Materials and

53

Supplies

Reserve

Materials

(formerly

Unassigned

Direct

Material [UDM]); and Receipt and Storage.

1.

Shop Stores (SS)

By definition, Shop Stores material includes

with

recurring

demand

and

those

held

as

items

insurance.

Recurring demand is further defined as "four or more issues

per year;"

whereas, an insurance item is one that must be

stocked to prevent work stoppage even though the item has

only

occasional

Comptroller
accounting

of

or
the

within

sporadic

demand.

Navy Manual,
the

Navy

According

to

the

Volume V, which governs

Industrial

Fund

(NIF),

stock

levels for SS material are:

90 days

- Demand-based Material (except raw material)

150 days - Demand-based Raw Materials

180 days - Forecasted Workload Material [Ref. 17:pp. 4511.

It

is

assistance

incumbent

from

the

upon

the

operating

Supply

Department,

departments,

to

with

review

insurance material annually to "keep the stock of such items

to a minimum."

The Supply Department

for

and

SS

planning

organization.

is also

Material

responsible

for

the

shop

stores is established, ordered, received, stored and issued

by Supply personnel.

They also perform level

requirements determination. [Ref. 16:encl. (1),

2.

setting and
pp. 1-3]

Direct Material Inventory (DMI)

DMI

is

availability
Furnished

material
or

which

project.

is

assigned

This

Material/Equipment

includes

(GFM)/(GFE),
54

to

specific

Government

ship-specific

material

for

overhauls

and

repairs,

project-specific

material for Public Works maintenance, capital projects, and

Depot

Level

Repairables

16:encl. (1),

(DLR)

overhaul

material.

[Ref.

p. 3]

The physical distribution, handling, and custody of

DMI

is

the

sole

responsibility of

until it is issued for use.

technical

screening,

outstanding
material.

orders,
The

Supply Department

Supply Department also performs

submits
receives,

operating

the

requisitions,
stores,

departments

and

are

expedites
issues

the

responsible

for

determining quantities and providing requirements based upon

valid Job Orders

appearing on JML's.

These requirements

must be sourced through all shipyard assets, including SS,

before they are ordered as DMI. [Ref. 16:encl. (1),
3.

p. 3]

Materials & Supplies Reserve Material (M&SRM)

Formerly known as Unassigned Direct Material (UDM),

M&SRM is an account within DMI for the management of unused

material

(excess).

The account is established to "control

and record selected inventories for possible future use or

disposition."

[Ref.

16:encl.

(1),

p.

5]

M&SRM

is

an

accumulation of excess material from:

1.

Unused DMI, standard and non-standard stock;

2.

Unused GFM/GFE; and

3.

Material recovered from production sites.

Before material can be transferred to this account, it must

be

screened

semi-annually,

for transfer back to the

55

Navy

Stock

Fund

for

(NSF)

shipyard policy

requires

provided "maximum

M&SRM be

that

addition,

In

year period.

a two

The

visibility through the improved use of ADP systems."

files of M&SRM assets to

shipyards exchange magnetic tape

each other so that new requirements may be screened against

them before acquiring additional material.
Disposition

of

unused

DMI

is

by

determined

the

Planning Department within 60 days of customer validation

M&SRM is

that a particular repair job has been completed.

retained

in

the

custody

of

the

Supply

Department

for

period of two years unless it is turned back to the NSF for

credit (standard material only).
Performance

measures

[Ref. 16:encl. (1),

established

by

the

p. 5]
shipyard

commander to control these materials are varied and complex.

Rather than

separating them throughout the text, they are

summarized as Table 1.
4.

Receipt and Storage

Material

established

to

minimize

improve customer service.

that a record of
maintained
Further,

for

receipt

and

receipt

storage

inventory

procedures

accuracy

errors

are
and

Material handling policy requires

delivery and
each

item

and

issue

a "clear audit trail,"

from

requisition

processing

must

to
be

issue.
done

quickly as possible to support the industrial operation.

56

be

as

TABLE 1
[Ref. 16:encl. (1),

Material Category
1. Shop Stores

pp. 1-6]

Measures
(a) STOCK TURN = Value of Issues/Inv.
Value
*Goal: two or more stock turns
per year
(b) Ratio - Insurance items:Demand-

based SS
*Goal: less than three percent of
Inv.
(c) Service level (Percent Req filled
by stk)
*Goal: 99% or higher (established
items)
97% or higher (plus new
items)
(d) Inventory Record Accuracy:
*Goal: Quantity - 90% or higher
Location - 97% or higher

**Gross Monetary Adjustment Absolute Value of inventory gains

and losses. *Goal: 10%
2. DMI

(a) All DMI will be on hand in time to

support the industrial process.
(b) Percent DMI Unused
*Goal: 10% of Dollar value of DMI
received
(c) Outstanding requisition at end of

avail.
*Goal: 1% or less
(d) Inventory Record Accuracy:
*Goal: Quantity - 98% or higher
Location - 98% or higher
**Gross Monetary Adjustment - 2%

or less
3. M&SRM

(a) Inventory Record Accuracy:

*Goal: Quantity - 98% or higher
Location - 98% or higher
**Gross Monetary Adjustment - 2%

or less
(b) Total Dollar Value (ceiling)
*Goal: $23 Million

57

The goal

for processing received material, which does not

require formal quality assurance inspection and/or issuing

it

to a customer,

is three

working days

for 95%

of the

transactions. Material requiring a formal QA inspection has

a goal

of

working days

15

[Ref. 16:encl. (1),

These

for

90%

of the

transactions.

p. 7]

policies

represent

the

extent

to

which

management oversees shipyard production material flow.

Most

performance measures are reported at least monthly to the

Supply Officer.
of

his

He reviews them to assess the effectiveness

material

divisions

and

make

future

strategic

decisions such as:

1.

Whether to add transportation assets to improve

material deliveries from the warehouse to production
shops.

2.

The need to hire additional personnel or reorganize

divisions.

3.

Determine how excess material should be disposed.

4.

Determine what Shop Store Inventory may be eliminated

due to low stock turn.

5.

Determine future Supply Department Budgets.

At the heart of the control system is the Shipyard

MIS

(SYMIS) that collects data

accumulates it in the database.

from all

to

monitor

discrepancies

processing

(such as

and

It di ?lays the data both

on the screen and in printed formats.

used

transactions

backlogs,

Daily reports are

research

inventory

losses or gains) expedite critical

requisitions, and evaluate employee performance.

58

Therefore,

as required by written policy, the SYMIS Material Management

subsystem and Shop Stores subsystem are used to the maximum
extent possible in the Supply Department.
however, is

Its usefulness,

limited to tracking what has already happened

and does not provide much information that can be used to

change the trends of growing inventory and poor inventory
accuracy.
OVERVIEW AND ANALYSIS OF THE SYMIS MATERIAL MANAGEMENT

C.

FUNCTION
The

computer-based

Shipyard

MIS

supports

shipyard

management by providing data processing capability in four

major

areas:

Industrial

Planning

and

Control,

Financial

Accounting, Administration, and Material Management.

the

Material

Subsystem,

SYMIS

includes

Within

three

major

applications:
1.

Material Requirements (MR)

2.

Shop Stores (MS)

3.

Material Management (MM) [Ref. 18:p. I-1]

Each of these functions is critical to the control of

materials

within

separately.

the

shipyard

and

Figure 8 is a system

will

be

analyzed

flow chart showing the

entire Shipyard MIS and how the MR, MS, and MM application
interface with the system.
1.

Material Requirements Application

The

Planning

MR

application

Department with

the

is

designed

to

identification
59

assist
of

the

material

4-)

>1~

0
rq0

sow
Q)

Z4

60

required to complete the scheduled work packages associated

with a ship overhaul or repair and to initiate the ordering
of

that

material.

It

assists

managers

in

streamlining

material identification by sorting through the vast array of

numbering systems that are used to identify repair parts.
In order to accomplish this task MR performs these primary
functions:
1.

Extracts all matprial

requirements for
availability by line item from various
source files;

2.

Converts commercial part numbers into National Stock

Numbers and screens them against shipyard assets;

3.

Validates requirements by adding in accurate pricing

information and other required data;

4.

Generates Scratch Material Sheets (SMS) that are used

to identify material;

5.

Passes requirements to MS/MM to initiate an order; and

6.

Provides
statistical
information developed from
historical data from similar work packages to assist
in making future material budgeting
(purchases)
decisions. [Ref. 19:p. I-l--I-4]
MR

is

used

primarily

Planning Department.
for

many

source

files

commercial
history

sources

of

at

the working

a repair
automated

level

the

Essentially it is a collecting point

material

identification.

from the Ship's Parts Control Center

sources,

in

Navy

designers,

industrial

Material
(SPCC),
material

(issued material only),

and other planning sources

are combined in the MR database.

The MR programs search the

source data files, extracting material identification data

for each requirement identified by the planner.
61

Although

application

this

tedious

eliminates most

catalog and microfiche review, it requires considerable user

data entry.

The Scratch Material Sheet, generated by the

initial data search, must be manually reviewed and annotated

to tailor it to the specific repair package being planned.
The updated data must again be entered into SYMIS to update
the MR master

file

so that

it

can be sent to the MS/MM

applications for screening and ordering.

Besides the user interaction time required, MR has
another drawback.

Even though it is the primary tool for

the planner to initiate requirements for scheduled shipyard

,"!ork,

MR does not

system.

interface with the automated scheduling

The material manager and the planner do not have an

automated

means

to

coordinate

order

deliveries,

using

historical leadtimes, with the scheduled job start date in

order

to

avoid

Neither material

unnecessary

storage

and

handling

costs.

leadtime nor scheduling information is an

input to MR even though the Required Delivery Date (RDD) is

a mandatory

entry on all

requisition documents.

Without

this information, the planner must review hardcopy schedules

and "estimate" leadtime of delivery, manually, in order to
make

an

estimation of

the

RDD.

This

procedure

is time

consuming, contributes to abuse of the requisition priority

system, and indirectly leads to "inflated overhead charges
by

raising

material

is

inventory
received

holding

costs.

excessively
62

early,

Additionally,
and

if

for

if
some

reason

the

job

is

cancelled,

the

shipyard

is

left

with

excess material and overhead costs used to expedite it.

2.

Shop Stores Application

Shop

Stores are

production shop which

for

issuing

required

and

they

support.

and storing the type

by

Application

"retail" outlets,

their

"customer"

supports this

inventory

control

located near the

They are responsible

and quantity of material

shops.

The

Shop

function by automating
functions

for

Stores

financial

management

and

operations personnel.
As most SYMIS applications, Shop Stores
process.

is a batch

Five major tape files retain the data utilized by

MS: the Master Stock Item Record (SIR) file, the Shop Stores
Ledgers

file,

the

Description file,
data

include

receipts,

Shop

Description

file,

the

and the Shop Stores Feedback file.

quantity

issues,

Stores

balances,

rejection

material

records,

DMI
File

descriptions,

financial

records,

quality assurance inspection labor/material cost information

and much more. [Ref. 20:p. 11-3]
MS sorts;
searches

files;

performs basic arithmetic;

and performs several

prints;

edits;

related routines

such

as reordering, JML screening and determining inactive items.

It

also provides

performance

and

management controls
ensure

maximum

to

monitor

industrial

inventory

support

by

minimizing the number of stockouts while investing the least

amount of NIF capital.

63

The

"Inventory Manager

Analysis

As

9, tue

shown

tool

primary management

in Figure

Data"

provided by MS

(report number MS455Q).

Inventory Manager Analysis Data

report displays the

financial and quantitative

of

and

the Shop Stores,

performance

can be summarized in various ways

according to the type of material in inventory.

Officer

is required

is the

to review the

The Supply

information in this

and

other reports periodically

(monthly and weekly) to isolate

problem

performance

areas

and

monitor

goals

addressed

in

Table 1.
Careful inspection of Figure 9 shows that MS-455Q is
comprised
useful

of

a large

information

amount of

data.

In

order to obtain

from such a "noisy" report, the manager

must be thoroughly familiar with it and willing to invest a

significant amount of time reading it.
Rather than carefully studying MS-455Q and the other
print outs from SYMIS, the Supply Officer is given a monthly
summary called the
is

locally

personnel
data,

"Shop Stores Performance Report,"

prepared

review

several

and consolidate

monthly

report

shop stores.

by

it

summarizes
The

his

staff.

SYMIS

reports,

Supply

the

performance

following data

the report:

64

Department

extract

on a locally prepared

elements

of
are

which

pertinent
form.

the

The

fourteen

included

in

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1.

Number of Inventory Line Items

2.

Inventory Value (dollars)

3.

Value of Material issued for the month reported

4.

Value of Material receipts for the month reported

5.

Stock Turn Over

6.

Number of Issues

7.

Effectiveness
(Number of Material Requests
divided by Number of Requests Submitted)

8.

Number of Line Items showing a balance of zero

9.

"Not-in-Stock" Rate for the shop store.

At

first

visible

glance,

by

contains

these

reviewing

many

more

particular

Figure
data

9.

In

fields

than

data

fields

fact,
a

Filled

are

not

report

MS-455Q

top-level

Manager

could effectively monitor.

There

is

yet

another

compilation

of

data

that

is

reviewed by the Supply Officer in his weekly meeting with

his

division

pulled

from

Managers.

This

SYMIS-produced

information

reports

and,

is
in

once

again

this

case,

entered into a microcomputer operating a commercial software

package and subsequently output in a color graphics format.
This data set includes:
1.

Inventory

Balances

by

Material

Classification

(DMI,

SS, M&SRM)
2.

Excess Material Usage

3.

JML

Submissions

by Material

Classification

(DMI,

M&SRM)
4.

Shop Stores Inventory Report (described above)

5.

Receipt Processing Time

66

SS,

6.

Receiving Backlog

7.

Receipt Inspections Backlog

8.

Physical Storage Backlog

9.

Storage Call-Outs Backlog (Material from DMI Warehouse

to shop)

10. Supply Department Budget

Other).

(Total, Labor, Material and

In order to produce this graphic presentation to the

Supply Officer during the weekly meeting, data is drawn from
several MM and MS

reports.

This step, like that for the

Shop Stores performance report, is necessary because SYMIS

has

poorly

capability.
useful

designed

and

no

graphics

A significant amount of time is spent to create

information

something

formats

report

that

from

was

not

the

shipyard

anticipated

information
or

desired

system,

when

the

system was designed.

MS is a batch-oriented processing system relying on
keypunched cards

and tape inputs

for updating.

Therefore

current information is not always available to the user "onscreen."

Database updating by batch-processes is performed

during slack operating hours;

the evenings

at Long Beach it is done in

(Monday through Friday) and on weekends.

This

is a significant drawback because, without accurate realtime

information,

it

is

difficult

to

plan

material

flow

accurately and make sound material management decisions.

Batch

processing

creates

an

additional

problem.

After a batch of jobs has been processed errors are reported

67

via printed reports indicating that some of the data were

rejected

by

the

system.

Exception

reports,

as

they

as

sometimes called, must be reconciled to find the errors and

enter

the

correct

data

into

the

system

immediately.

Correction of the database consumes a large portion of time

at

Long

Officer

Beach
on

and

backlogs

a weekly

considerably

from

are

basis.

these

monitored

Inventory

backlogs

by

the

accuracy

because

the

Supply
suffers

database

correction process takes time away from routine receipt and

issue

processing

functions.

If

error messages

could be

received upon data entry, as in most realtime systems, much

of

the

routine

work

could

be

accomplished

and

inventory

accuracy would be improved.

When

time

receipt/issue

is

spent

processing

accuracy suffers.

on

backlogs

exception
are

reports

created,

and

inventory

This may not seem obvious at first but,

if the data base does not reflect what is in the warehouse

inventory

accuracy is degraded.

Therefore, when location

counts are physically changed the data base must be updated

to maintain inventory accuracy.

Because MS is not a real

time system it is not unusual to encounter situations where

material has been issued from a Shop Store which has a zero
balance on

the

computer records

have been processed.

because not all

receipts

Normally when a receipt is processed

through MS, the computer program validates that all of the

information entered is correct and complete.
68

Receipts are

rejected for missing or incorrect data entry.

MS programs

search outstanding replenishment records in the Master File

attempting

to match the

inventory

record

with the receipt document number.

document number

If a match occurs, the

system completes the transaction by removing the outstanding

order record from the material outstanding

file.

If the

system cannot match the document numbers, it processes the

receipt but produces a "special notice card."

The card is

forwarded to Supply Department for manual review against the

Inventory Action Listing (MSI35B Part 1) and for appropriate
correction.
Daily

In addition to this report MS generates the

Transaction

Listing

(MSl35A

Part

1)

and

various

history reports which must also be reviewed to see if the

computer was properly updated during the receiving process.
[Ref. 20:pp. II-15--II-16]
The

manual

procedure

of

correcting

transaction

errors must be done daily to ensure that both the inventory

and financial records are kept current.
therefore,

spend

much

of

their

time

Material managers
on

this

function.

However, no matter how much effort is put into the database

it

is always at least a day behind.

introduced,

as

is

done

daily

If

an inventory is

under

cycle-counting,

reconciliation of discrepancies is difficult and inventory

accuracy suffers considerably.
Although
recordkeeping

the

that

system
is

eliminates

required
69

in

the

much

of

management

the
of

inventory,

batch-processing

creates

its

own

offsets

any

paperwork

time-savings

and

listing-reconciliation

backlog.
gained

This

by

backlog

automating

often

material

records offsets.
3.

Material Management Application

The objective of the MM Application

the

capabilities

cf

the

Shipyard

MIS,"

is to "improve
and

to

support

material control by improving the accuracy, timeliness, and

accessibility

of

information.

MM, which

replaced the old

Industrial Material (MC) Application, is designed to:

1.

Permit positive control of all material;

2.

Provide a single repository of

status of material;

3.

Avoid delays in database updating by providing on-line

updating capability;

4.

Produce timely reports for monitoring performance;

5.

Provide statistical and historical information;

6.

Reduce clerical effort; and

7.

Provide
a more
efficient means
of
physical inventories.
(Ref. 18:p. 1-3]
The

all

MM

Direct

information about the

application maintains a

Material

Inventory

accomplishing

complete

(DMI)

from

record
the

of

time

requirements enter the system until the material is issued.

It

retains

information

excess material,
the status of

on

unshipped

and M&SRM assets.

DMI

material

(rip-outs),

Additionally, it tracks

material requests sent to Shop Stores to

be filled.

70

MM uses more modern data processing than does MS.

It provides on-line access and updating of material data in
a centralized data base
users

have

access

to

from remote terminals.

the

same

realtime

virtually eliminates the need for

That is,

information.

punched cards

MM

and huge

paper listings which are time consuming and vulnerable to

error.

[Ref. 18:p. 1-4]

Material

Management

performs

many

of

functions on-line that MS does in a batch mode.

the

same

So, rather

than repeating the same discussion, a review of some of the

more unique MM features is in order.
a.

Purchasing
MM provides complete status on all

contracts

and

material.

It

purchase

orders

maintains

an

for

outstanding

non-standard

historical

record

overhaul
of

vendor

contract delivery performance data and it provides all of

the information to the user on-line.
b.

"Rip-out" Material
MM tracks the status of material which has been

removed,

for

refurbishment

or

storage,

from

ship

in

overhaul.
c.

Status Processing
The material ordering statistics, information on

material

received

requisitions,

and

but not moved, the backlog of purchase

the

status

of

critical

items

are

available on screen or can be produced in printed form.

71

all

Excess Material

d.

MM identifies excess material upon completion of

work and allows the processing of this material as a turn-in
for credit, a turn-in to disposal, a transfer to another
open job order, or retention as M&SRM.
e.

Physical Inventory
MM produces reports that provide locations and

quantities of all items stored in a particular warehouse or

row

within

cards

that

used

by

warehouse.
inventory

It

produces

personnel

to

inventory

annotate

count

physical

counts that will be entered into the computer for automatic

reconciliation

with

inventory

records.

After

inventory

reconciliation is complete the computer generates adjustment

transaction records, which management can use to track gross
monetary adjustments. [Ref. 18:p. 1-5--I-7]
The Material
heart

of

the

material

Management Application

information

is

at

flow within SYMIS.

the
It

gives management positive control, from request to issue or

disposal,
MM

of all overhaul material.

receives

inputs

from

the

As shown in Figure 8,

Shop

Stores,

Cost,

and

Production Control Applications directly, updating each of

them

as

between

well

as

the

Accounts

the various applications

tape and key punched card.

to

list

processing

Payable
is

Files.

Interface

performed by magnetic

Transaction reports are produced

exceptions,

72

which

are

then

manually

researched and corrected to ensure database integrity. [Ref.

18:pp. 1-8--I-10]
D.

HARDWARE AND SOFTWARE CHANGES

System changes

are centrally

controlled by

Naval

Sea

Systems Command's Automated Data Systems Activity (SEADSA).

Suggestions
source

for

used;

changes

change

other

outside

deficiencies

from

sources
of

found

individual

include NAVSEA

NAVSEA

by

shipyards

control,

system

users

audits, policy

and

or

are one

results

SEADSA

of

personnel.

Regardless of the source, after a cost-benefit analysis is

prepared by the activity proposing change, SEADSA evaluates
the

proposal

to

assess

its

impact

upon NAVSEA

policies.

Each analysis considers the cost of making the change both

in terms of

programming effort and of

its

impact on the

entire Shipyard MIS; it weighs the hardware requirements in

terms
change

of

system

would

performance;

fit

within

the

and

it

implementation

previously

approved

software

OPNAVINST

5231.1,

"Procedures

changes

in

for

Automated Data Systems Development."

SEADSA at this stage,

determines

exercises

how

schedule

accordance

the

the

Management

of

with
of

[Ref. 19:p. 1-5]

its

control

over the

system by either accepting or rejecting the proposal.

If

approved, a detailed specification, which becomes the blue

print

for

analysis

and programming,

is

written.

Once a

program is completed, it is compiled, tested, and approved

for implementation by SEADSA.

It then become.s a part of the

73

approved

Shipyard

forwarded

to

MIS

each

of

programs
the

library

shipyards

and

copies

are

they

are

where

implemented by the individual Data Processing Offices. [Ref.

18:p. 1-6]
If

conclusions

about

SYMIS'

effectiveness

as

management tool are to be made, the system must be assessed

both
its

in terms
usefulness

general

of the
to

the

description

within SYMIS have

framework established earlier and of

of

manager.
the

Shipyard

material

policy

management

and

functions

defined the environment and management's

expectations of the system.

Now, the attention will shift

to the ability of SYMIS to meet those management needs.

74

V.

The

ASSESSING SYMIS EFFECTIVENESS

primary

Shipyard

question,

Long

information?,"

Beach
is

fundamentals

of

the

"Does

provide

the

MIS

useful

at

management

Naval

decision-making

focus of this study.

material

the

and

Thusfar, the
MIS

have

been

reviewed to construct a model that will help answer such a

question.
system

Today's material manager must have an information

that

production

enables

him

materials.

performance,

material

or

her

to

Historical
rejection

leadtimes should be available.

control
data

rates,

the

flow

including

of

vendor

requirements

and

Accurate job material lists

from the planning department, that are readily available to

purchasing, will enhance vendor selection (for non-standard
material)

and

material.

The MIS should help improve inventory accuracy by

reduce

incidences

of

ordering

the

wrong

generating usable inventory aids; provide a user interface

that

promotes

processing;

virtually

error-free

receipt

and

issue

and produce inventory reports that are timely,

accurate and well-formatted, highlighting problem areas for

management

attention.

interdepartmental

The

coordination

between

all

automate

routine decisions

users

with

system
by

minimal

should

allowing

enhance

communication

disruption;

and provide useful

it

should

information

for solving more complex problems; and shoulu be a planning

75

tool

that

schedule

links

material

requirements

(assuming that the shipyard

to

the

production

is given more control

over its planning horizon).

Using the four characteristics (analytic sophistication,
information

currency,

information

overload,

and

output

complexity) along with the material management concepts (MRP

and JIT),

a final

assessment of SYMIS as a Management tool

will be made.
A.

INFORMATION NEEDS
Although

it

was

mentioned

earlier,

the

types

of

decisions that Material Managers must make bears repeating.

In

order

to

lower

accuracy

SYMIS

history.

It

inventory

must
must

do

levels

more

aEssist

than

the

and

improve

just

Supply

track

Officer

inventory
material
in

making

strategic decisions for the future.

Table

I outlines

shipyard policy.

the

performance

measures

required by

Currently SYMIS produces the data to show

the Supply Officer how his department's performance compares

to

these

goals

but

offers

no

forecasting

or

planning

information to answer these strategic questions:

1.

Should additional transportation assets be added to

improve warehouse to shop deliveries in the future?

2.

Are additional/personnel required to

division workload increases/decreases?

3.

How can excess inventory be reduced from $30 million

to $23 million? How can it be reduced further?

76

meet

material

4.

leadtime
needs
and
future
material
on
Based
information how many Shop Store line items can be
eliminated or what quantity reduction can be made?

5.

What will be budget input

projected material needs?

6.

What can be done to achieve the stated inventory

How can 100% accuracy be
accuracy goals (Table I)?
achieved?

for next year based on my

Without improving the level of analytic sophistication,

hardware

upgrading

by

software,

aod

SYMIS

be

will

ineffective as a strategic planning tool.

B.

ANALYSIS
The Shipyard Management Information System is primarily

second

generation, batch-oriented

system.

It

relies on

old technology which makes communication between subsystems

cumbersome

and

often

SYMIS has both an EOQ model

selecting

items

for

sophistication is low.
real

time

with

an

Despite

impossible.

the

fact

that

(see Chapter II) an' a model for

inventory,

its

degree

of

analytic

Only the MM Application operates in

interactive

data

base.

Since

only

MM

controls DMI, Ship Stores Material is left under the control

of a batch-oriented system.
SYMIS,

because

of

its lack of

analytic sophistication,

causes more problems for the individual material management

employee that it seems to prevent.

That is,

every desk was

covered by reports of data refections, backlogs of receipts

and

issues,

and

other

computer-related

administrative

actions that required manual intervention and research.

77

One

manager

said

that

her biggest problem

was

not

inventory

accuracy or excess material accumulation, it was "poor desk

procedures."
amount
data

The

of time

average

researching

employee

spent

exception

from past batch runs.

an

inordinate

reports of

rejected

Often the reports were quite

long and required a great deal of manual research.

While

this task was being performed receipts and issues were not
being processed and the daily backlogs were increasing.

One

of the measurements the Supply Officer looked at was receipt

backlog,
still

and

about

although
three

performance

or

needlessly

sophistication

and

it

showed

a downward trend

four days.
because

design

is

The
its

system

level

inadequate

is

of

to

it was
hurting

technical

keep

up with

demands placed on it by its users.

Information generated by t'.e batch-process is usually a
day or more behind.
The systems/processes.. .are poorly integrated, leading
to a situation where the various departments operate as
individual entities. The data used by one department is
difficult, if not impossible, to share. [Ref. 21:p. 2]
Further, data
decision-making

inputs and

outputs

information

is

are

not

not coordinated
available

on-line

and
to

either top management or the first echelon material manager.

In short, with SYMIS there is no centralized database that
contains current information on all aspects of the material
management function.
SYMIS

material

technological

management

shortcomings,

do
78

not

reports,
help

the

like

its

strategic

management

process

either.

The

reports

overloaded with unnecessary data.

who

is

bombarded

complex

MIS

Simple

report

with

output

formats

only

and

complex

and

To the tvDical manager

information

serves

are

from

to

many

sources

complicate

graphic

the

displays

job.

reduce

information overload and improve management effectiveness.

At Long Beach, the Supply Department accumulates several
statistics that are used to monitor material flow throughout
the shipyard (see Chapter IV).

Data that are used to create

these statistics come from the hundreds of transactions and

reports generated by SYMIS, e.g.,
order to obtain all

that

the

reports are

is of

displayed
helps

laden with secondary

information

reports

are

compiled,

and

selected

from each report is processed and graphically

on

to

Since the

not have the time to read extraneous

management

information

In

As is the case with MS455Q,

little interest to a busy manager.

Supply Officer does

data,

(Figure 9).

data requirements, many other reports

must be produced and reviewed.

most of

MS-455Q

an off-line microcomputer.

overcome

the

output

This

complexity

extra
problem

step
by

displaying key data elements making it easier to visualize

trends, and track departmental performance.
The Shipyard Management Information System is primarily
a

material

fairly

tracking

well

subsystem

given

system.
its

integration

It

antiquated
capability.

79

accomplishes
technology
Outputs

this
and

are

task

limited

generally

complex and usually at least a day behind, but do provide

the Supply Officer and Shipyard Commander an accounting of
Without significant

the whereabouts of shipyard materials.

hardware and software upgrades that would give managers a

fourth generation, real time system however, the users must
be satisfied with tracking.
more

Unless the system provides a

integrated planning function and an on-line database

that can be visible to all users, lowering current inventory

levels

and improving

inventory accuracy will be virtually

impossible.
The

shipyards

are

experiencing

new

age

of

both

competition with commercial and with other naval shipyards.

Coopers and Lybrand (see Chapter III) explained that excess
material
but,

inventories not only are costly in dollars spent

contributed to

order,

purchase,

increased indirect personnel

expedite,

receive,

warehouse,

and eventually dispose (excess) material.

costs to
distribute

Unless inventory

levels are lowered and these holding costs reduced, overhead

charges

will

continue

to

rise

and

adversely

affect

the

ability to compete.
Another

attribute

of

a useful

management

information

system is its ability to assist in the planning process.

a

quote

from

NAVSEA's

request

to

the

Chief

of

Naval

Operations for a new management information system:

Responsive

management

information

systems

(MIS)

represent one of the most important tools needed to

support improved production, scheduling, and planning
functions at the Naval Shipyards ....
The Navy must

80

In

adopt managerial techniques and technologies similar to

private industry. [Ref. 21:p. 1]
C.

INFORMATION SYSTEMS FOR THE FUTURE

If the shipyard wants to plan its material requirements

it must have the automated capability that techniques such

as MRP and, to some degree, JIT require.

In its current

form, SYMIS does not link scheduling and material management

modules

through an

schedule

interactive

information

process.

is

data base.

passed

to

MM

Instead,

through

the

work
batch

Unfortunately the information is not timely and

cannot be used to plan material flow.

As a result, stated

goals for inventory excesses are consistently exceeded.

MRP and JIT requires that

schedule information, JML's

supplier performance data, material leadtimes and historical

usage data

must

Key operations,

come together in

a centralized database.

the basic work planning tool

used by the

planning department to construct work schedules, are three

to four month time blocks which break work down by major
pieces

of

equipment

(see Figure 10).

Key operations may

contain many individual tasks for which JML's are created.

JML creation begins the material flow for which the Supply
Department is responsible.
Key operations have been criticized in past studies for
being too comprehensive.

It has been said that,

81

Ica

E-4)

(0~

0)0

400

W0

LC

aIL

a82

The Key op[eration] is vulnerable to mischarging, and

when inaccurate charging is entered into the MIS, future
work estimations will be incorrect. (Ref. 22:p. 23]
When the size and span of a work element is too large, it is
impossible

to

effectively

manage

work

and

evaluate

performance.
Key operation size can be equated in a theoretical sense
to batch size in a pure manufacturing organization.
is,

the

larger

the

batch,

the more difficult

That

production

management and efficient operation are to maintain.

Thus,

according to the JIT fundamentals addressed in Chapter II,

smaller

batches

(smaller work breakdown

unit)

yield more

efficient production.
This idea was recommended by Coopers and Lybrand and is
being implemented experimentally at Puget Sound NSY.
is,

scheduling

small

batches)

control

and

work
to

at

the

individual

give

the

shop

improve

the

task

manager

planning

and

level

That
(i.e.,

(foreman)
cost

more

estimating

process.
For the material manager scheduling work in qmaller time
units

creates

techniques

the

possibility

(MRP/JIT)

discussed

of

applying

earlier.

some
For

of

the

example,

assu..e that SYMIS had an interactive real time database that

contained

supplier

performance

data,

leadtimes

(for both

government and commercial sources) and schedule broken down

into

individual

tasks.

The

material

manager

could

then

review the JML's given him by the planner on line dividing

83

parts requirements into two categories:

furnished by government assets;
purchased

commercially.

standard material,

and non-standard material,

Then,

using

the

leadtime

data

standard, material could be ordered through the Navy Supply

System with an assigned RDD and requisition priority that
would

ensure

start date

delivery

(ideally) in

(MRP application).

time

to meet the job

Non-standard material could

then be ordered from a commercial source who could deliver

in

lot sizes small

enough to meet production requirements

and satisfy the shipyard work schedule (JIT Purchasing).

Material flow planning, as in this scenario, would then
give

the

Supply

Officer

inventory

requirements

material.

Obviously,

the

and
some

flexibility

begin

to

inventory

to

plan

reduce

his

will

have

his

excess
to

be

maintained to smooth the irregular demand patterns within a

production
will

environment.

contribute

to

Nevertheless,

lowering

these

Material

levels

by

planning

eliminating

unnecessary material requests caused by poor work planning.

Another aspect of planning that must be considered, with
respect to
design.
right

reducing

excess

materials,

is

engineering

and

In order to create a useful JML, from which the

production

material

can

be

ordered,

drawings,

technical manuals and other technical documentation must be

accurate.

Coopers

information

was

resulted

the

in

and

often

Lybrand

found

inaccurate

and

that
that

wrong material Leing ordered.

84

engineering
it

directly
Since the

specifics of this issue are beyond the scope of this study,

it is sufficient to say that SYMIS must contain sufficient
random access memory

capacity to retain large volumes

part number information.

of

Such data will help planners to

cross reference part number information on drawings to Navy

stock

numbers

or

commercial

manufacturers

part

numbers.

Off-line data bases such as "Haystack" or "Parts Master" are

also

available

on

the

commercial

market.

These

systems

allow the use of modems to download part numbers and ensure

the

correct

material

is

ordered.

These

commercial

data

bases have both commercial and Federal Supply System stock

numbers.
If the planning and production functions can integrate
and more clearly define the work package, then more accurate
material

orders

and

delivery

schedules

can

leadtime and vendor performance data held

history files.
Time

techniques

be made

from

in the material

Material Requirements Planning and Just-indescribed

earlier

could

then

be

used

to

reduce the need to carry as much inventory and eliminate a

source of excess material.
In order to apply this type of theoretical thinking to
material

management

in

the

shipyard

departments must be achieved.

offers such an opportunity.
was

interconnected

database

and

by

integration

of

all

An upgraded version of SYMIS

If the system shown as Figure 8

single,

communication

real

between
85

time

all

interactive

functions

was

possible,

then

management's

SYMIS

could

needs.

But,

be

easily programmed

automation

alone

to meet

is

not

the

answer.
If

the

shipyard organization

successfully

compete

with

other

business plan must be developed.

upon

a framework of

is going

attainable

to be able

shipyards,

an

to

overall

Strategic planning, built

short and long-term goals

which can be monitored and controlled by management is the

first step toward reducing inventories, improving inventory
accuracy

or

information
improve
investing

lowering
system

poorly
in

(no

overhead
matter

managed

costs.
how

and

itself,

sophisticated)

organization.

expensive hardware

By

So,

software,

an

cannot

prior

to

a complete

business plan must be created and, as part of that plan,

information requirements established.

86

SUMMARY AND RECOMMENDATIONS

VI.

A.

SUMMARY
Given

ships

the

and

rising

the

government

costs

attention

of

overhauling

that

expenditures,

is

finding

inventory problems is important.

being

paid

solutions

bids

for

to

to

lower

shipyard

overhead costs up which

weakens a shipyard's competitive position.

solicit

repairing

Holding costs and direct

outlays for excess materials drive

to

and

overhaul

work

New initiatives

that

force

public

shipyards to be competitive with each other and with private

yards make

cost reduction even more critical to the yard's

very survival.
The

purpose

question:

of

Does

this

the

thesis was

Management

Beach NSY provide material

information.

In

order

to

to

answer the

primary

information system at Long

managers useful decision-making

answer

it

four

basic

research

questions were addressed to ascertain:

1.

Theoretical information needs of the material manager.

2.

Factors that should be considered when evaluating

information system.

3.

What

material

management

and

MIS

discrepancies

an

were

discovered by the many studies of the past few years.

4.

What

policies

by

higher

authority

are

influencing

managerial decision-making in the Supply Department.

Answers
gathered

to

the

from

questions

background

came

from

literature,

87

information
analysis

of

that

was

previous

shipyard

studies,

analysis

of

current

shipyard and

NAVSEA

instructions, and personal and telephone interviews with key

material and MIS managers at the shipyard.
Several
at

Long

(18.37

problems

Beach

NSY.

percent

accuracy

concern Materials
Among

over

the

percentages

Account);

and

these,

past

rising

five

on

inventory

years);

(particularly

reliance

Management Division

in

low

the

outdated,

levels

inventory

Shop

batch

Stores

processing

computers, head the list as the most troublesome.

Currently, Long
account

that

shipyard
present

Beach Shipyard has an excess

comprises

inventory,
this

over

fifty

representing

material

is

destined

percent

about
to

$30
be

of

inventory
the

total

million.

returned

to

At
the

Navy Supply System for credit or to a DOD disposal activity.

Although

listings

of

excess

materials

are

sharcd

bctween

shipyards, they are usually not reviewed prior to ordering

by most managers.

Therefore, once material is ordered and

not used it is usually wasted.

The lack of an adequate planning function within SYMIS
is

the

largest contributor

inventory.

SYMIS does

not

to

the

growing excess

material

link scheduling information to

the material management modules through an on-line database.

Instead, work
the

batch

start and stop dates are fed into MM through

process,

orders of unnece ,ary

and

are

material

usually

too

late

to

prevent

from leaving the shipyard or

88

give

the

before

material

they

percentages

manager

arrive.
are

enough notice

Stated

exceeded

goals

during

to

cancel

for

excess

new

overhaul

each

orders

material
as

the

problem steadily worsens.

SYMIS, in its current configuration, offers no solution
to

this

problem.

Without

information

integration

between

the Planni-q Department and the Supply Department, material

deliveries

can

requirements.
the

never

be

coordinated

with

schedule

Furthermore, without adequate information in

opposite

direction,

current

requisition

status

information is not available to the Production Department to

inform

them

of

nonavailability.

possible

delays

due

to

material

Managers have some information but it

is

not timely enough to support strategic decision-making.

Timing of
the

final

press

information

stages

everyone

of

an

for

flow is critical particularly

at

overhaul when scheduled departures

time.

Many

manhours

are

wasted

expediting materials that are already in the warehouse but

not so designated on the data base.
to

increased

operating

expenses

Wasted manhours add up

and

detract

from

the

performance of the entire shipyard needlessly.

A second problem of the highest priority to the shipyard
manager is poor inventory accuracy.
the

Unofficial estimates of

top management of the Supply Department show inventory

accuracy
percent

in
and

the

Shop

Stores

eighty-five

to

Account
ninety

89

at

fifty

percent

in

to
the

sixty
DMI

Account.

Although

was

this

rough

estimate,

the

same

figures were echoed by several different managers during two

days

of

required

personal

interviews.

inventory

accuracy goals

Recalling
to be

that

above

policy

ninety-five

percent in all categories, this is a significant problem for

the Supply Department to overcome.
Once

again,

problem.
base,

SYMIS

to

be

at

the

root

of

the

Although the MM application has an on-line data

which

is

probably why

inventory accuracy
overshadowed by
MS

seems

it

shows

a higher

individual

for the DMI account, its performance

is

the poor performance of the batch-oriented

application.

Batches are processed,

in the best case,

the evening after a particular stock number transaction was

made.

Therefore, information in the data base is always at

least one day behind.

Multiple issues, receipts, transfers,

and

against

spot

occur

inventories

simultaneously

on

any

fast moving

day.

In

line

item

may

batch processing

system, rejected transactions can lead to numerous errors in

this situation.

Then on the next day the error will appear

on a rejection report showing that something did not process

correctly.
of

a real

occur,
store

The inventory then is erroneous.

time database that

the probability

of

inventory accuracy

is

having
is

updated when transdctions

ninety-five

virtually

records are kept.

90

In the absence

zero,

percent
unless

shop

manual

In addition to unsophisticated analytic sophistication

and the lack of information currency, SYMIS ccntributed to
information

overload

because

Poorly designed management

of

its

reports

their own reports off-line.

output

complexity.

forced users to create

Also, the volume of exception

reports to be processed daily, after the previous evenings

batch run, contributed to workload backlogs desks.
Obviously, when SYMIS was designed, it was hoped that
the

workload

improved.

would

be

reduced

and

Rather SYMIS seems

work for its users.

performance

would

be

to have created additional

It is apparent, therefore, that it may

be time to reevaluate its usefulness.

NAVSEA has

recognized the problems with SYMIS

taking steps to upgrade the system.

and is

However, funding will

be the biggest obstacle to overcome.

The SYMIS network is

a piece-meal compilation of computer hardware that grew from

a series

of

short-term

"fixes"

resulting

funding to upgrade the entire system.

from

inadequate

Large organizations,

like the system of naval shipyards, require a strategy and

goals to achieve it that include a comprehensive information
architecture based on the needs and performance measures set
forth by key management personnel.

SYMIS cannot be fully

improved until such a strategy is formulated and the role of

the entire system established within that strategy.
funding

always

seems

to

fall

short,

91

however,

Since

NAVSEA may

never be able to execute such a grandiose plan and may have

to settle for a "bits-and-pieces" solution.
B.

RECOMMENDATIONS
When considering

improvements to computer

systems the

quest to have the "latest and greatest" equipment regardless

of the need or the cost seems to influence decision-making
the most.

Where computers are involved people feel that

buying state-of-the-art equipment is going to solve all of

the organization's problems without any procedural changcs
outside the management

information system.

Obviously this

is false, but still some fail to see this and, although I

concluded by showing the need for a new system I will offer
some recommendations that should be considered well ahead of
purchasing any new system.
The

problems

mentioned

throughout

this

study

are

not

going to be solved solely with a computer unless fundamental

production, material
are

challenged

established.

and

management, and accounting procedures

an

overall

organization

strategy

In other words, NAVSEA must design a "manual"

operational system based on sound principles and a business

strategy

and

then

consider

whether

or

not

it

should

be

automated.
The following actions are recommended to assist in the
creation

of

an

improved

Shipyard

Management

System for Long Beach and other naval shipyards:

92

Information

1.

Strategic Planning

1.

The first step must be to develop a sound business

strategy or an overall vision for management to
establish goals to execute the strategy.

2.

Create a comprehensive list of all problems, real and

perceived that must be corrected and incorporate them
into the strategy-building process.

3.

Determine whether or not to continue with the current

accounting-based management system.
Many private
sector firms are considering techniques used by the
Japanese which are based upon concerns for quality,
inventory levels, productivity, innovation, and the
skills,
training, and morale of the workforce.
Traditional accounting-based systems, with performance
measures based cn pure financial controls are being
found by researchers to be inadequate in production
environments and even some service organizations.

4.

Request
assistance
from
commercial
sources,
specifically shipyards, to see how the private sector
formulates strategy and what performance measures they
use.

5.

Consult with experts at leading academic institutions,

including the Naval Postgraduate School, who can offer
fresh ideas consistent with the most current theories
of shipyard production and material management.

6.

Review the current literature discussing shipyard,

industrial, and material management to see what ideas
may be applied to the naval shipyard.

7.

Have
representatives from every aspect of the
shipyard be involved in formulating the strategy so
that a fully integrated and comprehensive plan is
created
and full management support for it is
achieved.

8.

Develop a set of performance measures that are

consistent with the strategic plan.
The measures
should be easily understood; applicable to the goal
achievement they are controlling; and consistent with
improving production, lowering excess inventory, and
solving other important shipyard problems.

9.

Once a plan and performance measures are established,

examine SYMIS to determine if it can support the plan
in its current configuration and identify what modules
should be changed.
93

2.

System Design

1.

Hardware should be capable of providing a real time

iterative data base and should have a mass storage
capability, like CD-ROM, that can hold the enormous
amount of data that must be accessed quickly.

2.

Modem connections with parts identification services

such as "Haystack," should be included to assist
planners to more accurately identify part numbered and
stock numbered material for the generation of new
requirements.

3.

Networking between shipyards should be considered.

Information sharing, other than by mailing magnetic
tapes, especially sharing records of excess material
inventories, as required by policy, is necessary to
lower inventory levels.

4.

System design must be done by the users and managers-not left to the computer programmers. The new system
must fulfill user needs if it is to be accepted.

5.

The new design must help managers plan material

requirements better.
It should link scheduling and
the material ordering process directly so that
accurate material lists with valid required delivery
dates can be created.
In addition, the new software
must be able to forecast and have an MRP capability
that
fully
integrates
scheduling, planning,
production, and purchasing.
It must also include
upgrading of the Shop Store (MS) Application so that
all categories of shipyard material can be managed online.

6.

Report formats should not be as rigid.

Re-h' - the
user should have the ability to build his or
..
r own
reports. In addition, a graphics capability should be
included so the data presentation is more visual and
trends are easily seen.

7.

The new system architecture must be fully integrated,

enabling all departments to freely transfer and share
data with one another.
3.

Policy Considerations
If

sweeping

changes

finally

do

result

fror, this

process policy change must be made in a timely manner.

As

is often the case, strategic changes are made but are not
94

communicated

to

system

users.

Whatever

business

plan

results it must be endorsed by the highest levels of the

organization

and passed on to all

levels of the shipyard

organization.
C.

SUGGESTIONS FOR FURTHER RESEARCH

This area offers many possibilities for research.

The

shipyard of the twenty-first century should be the primary

focus.

The

feasibility

of

implementing

Just-in-Time

manufacturing principles seems to be most appropriate at the

present time.

Also, studies that lead to the determination

of appropriate performance monitoring measures should also

be performed.

Contracting research that would apply just-

in-time purchasing within the context of government contract

law

would

also

inspire

new

ideas

times and reducing inventory levels.

95

for

improving

delivery

LIST OF REFERENCES
1.

Business Logistics Management

Ballou, Ronald, H.,
Planning and Control, 2d ed., Prentice-Hall Inc., 1985.

2.

U.S. General Accounting

Management--Practices of
Companies, 11 July 1988.

3.

Radford, K. J.,
Managerial
Publishing Co. Inc., 1975.

4.

Ahituv, Niv and Neumann,

Seev,
Information Systems for Management,
Brown Publishers, 1986.

5.

Gaither, Norman, Production and Operations Management-A Problem-Solving and Decision-Making Approach, 3d ed.,
Dryden Press, 1986.

6.

Lee, Lamar, Jr., and

Materials Management,
1971.

7.

Blanchard, Benjamin S.,

Logistics Engineering
Management, 3d ed., Prentice-Hall, Inc., 1986.

8.

Wright, Oliver, W.,

MRPII:
Unlocking America's
Productivity
Potential, Oliver
Wright Limited
Publications Inc., 1981.

9.

Davis, Gordon, B. and Olson, Margrethe, Management

Information Systems--Conceptual Foundations, Structure,
and Development, 2d ed., McGraw-Hill Book Co., 1985.

10.

Riley, M. J., Management Information Systems, 2d ed.,

Holden-Day Inc., 1981.

11.

Pasztor, Andy, "Attempts to Streamline Pentagon

Procurement Soften Amid Resistance of a Jealous
Bureaucracy," The Wall Street Journal, 6 June 1989.

12.

U.S. General Accounting Office Study, Navy Maintenance:

Costs to Overhaul Navy Ships at Private Shipyards, 9
January 1986.

Office Report, Inventory

Selected Private Sector
Decision-Making,

Reston

Principles
2d ed., Wm.

of
C.

Dobler, Donald, Purchasing and

2d ed., McGraw-Hill Book Co.,

96

and

13.

U.S. General Accounting Office Report to the Secretary

of the Navy, The Navy Can Improve Material Management
at Naval Shipyards, 6 May 1985.

14.

Coopers &
Industrial
1986.

15.

Souther, Rory L., Evaluation of Inventory Management

Policies at Naval Shipyards, Master's Thesis, Naval
Postgraduate School, Monterey, California, June 1988.

16.

Naval Shipyard Long Beach Instruction 4400.4, Policy

for Industrial Material Management, 3 June 1989.

17.

Comptroller of the Navy Manual, Volume

1000), Navy Industrial Fund Accounting.

18.

Shipyard Management
Volume 24.

Information

19.

Shipyard Management
Volume 22.

Information Systems Users Manual,

20.

Shipyard Management
Volume 21.

Information Systems Users Manual,

21.

Naval Sea Systems Command Unclassified Letter:

NAVSEA
Serial 07/200 to Chief of Naval Operations (OP-04),
Subiect:
Mission Element Need Statement for the
Shipyard Production Management Information System, 27
July 1988.

22.

Stearns, Anthony, "Shop and Zone Administration and

Management:
The Transition to Zone Outfitting in
Repair and Overhaul at Puget Sound Naval Shipyard,"
Journal of Ship Production, v. 5, February 1989.

Lybrand, Management Analysis of the Navy

Fund Program, Shipyard Review Report, June

97

System

(NAVSO P-

Users

Manual,

INITIAL DISTRIBUTION LIST

NO. COPIES
2

1.

Defense Technical Information Center

Cameron Station
Alexandria, Virginia 22304-6145

2.

Library, Code 0142

Naval Postgraduate School
Monterey, California 93943-5002

3.

Professor Joseph G. San Miguel, Code 54Sm

Department of Administrative Sciences
Naval Postgraduate School
Monterey, California 93943-5000

4.

Professor Dan Trietsch, Code 54Tr

Department of Administrative Sciences
Naval Postgraduate School
Monterey, California 93943-5000

5.

Professor David R. Whipple, Code 54Wp

Department of Administrative Sciences
Monterey, California 93943-5000

6.

Commanding Officer, Code 500

Long Beach Naval Shipyard
Long Beach, California 90822

7.

Defense Logistics Studies Information

Exchange
U.S. Army Logistics Management Center
Fort Lee, Virginia 23801

8.

Lieutenant John A. Rackliffe

5474 Bounty Street
San Diego, California 92120

98